The Franco-American Alliance for Islamic Finance (FAAIF) and the African Islamic Economic Foundation (AFRIEF) have joined forces to promote Islamic finance in Africa.

Camille Paldi, FAAIF CEO, and Baba Yunus, AFRIEF CEO signed a memorandum of understanding (MOU) to cooperate in facilitating investment in African nations.

“Africa is now embracing large-scale Islamic finance as it seeks to tap cash-rich Middle Eastern Investors to finance large infrastructure programs,” Paldi said.

Islamic finance is gaining momentum around the world with major banks and financial institutions issuing million dollar Islamic bonds (sukuk), developing takaful (Islamic insurance) companies, and implementing legislation and regulations in order to enable Islamic finance transactions.

Paldi said the business leaders of most nations of the world recognize Islamic finance as a valuable business model and form of alternative finance to stimulate economic growth, raise funds for businesses and government projects, and diversify assets, investments, and investor classes.

“Sukuk are particularly suited for sub-Saharan Africa, a region that needs huge investments in infrastructure, from power stations and railways to ports and roads,” he added.

According to EY, the global sukuk market is projected to reach $900bn by 2017.

Paldi said that in Africa, the Seychelles and Ghana became the first countries to issue Islamic bonds in 2006 and 2007.

In 2013, Nigeria issued a $62m Sukuk, whereas Senegal raised $200m through a sukuk issuance the following year and South Africa issued a $500m sukuk in 2014, which was more than four times oversubscribed.

“Even Gambia and Sudan have issued sukuk, however, for small amounts and on a short-term basis,” said Paldi.

He said Morocco and Kenya are laying the legal groundwork to issue sukuk and operate Islamic banks.

“Tunisia also has a sukuk issuance in the pipeline, however, delayed its planned issue of $500m in Islamic bonds until the third quarter of this year in order to allow parliament time to rectify a law concerning the sale,” he said.

“It is the right time for Africa to engage in Islamic finance to attract funds for infrastructure and government projects as well as raise capital for African businesses,” he said.