Islamic Banking in South Africa (Banking Association South Africa)

A standards paper from The Banking Association South Africa's Committee on Financial and Economic Standards (COEFS) describes how Islamic banking works in South Africa and reports the industry body's own market data. It explains that the country runs two models in parallel: a fully-fledged Islamic bank — Albaraka Bank, established in 1989 and named as the first to successfully offer Shari'ah-compliant products in South Africa — and Islamic 'windows' at conventional banks (First National Bank from May 2004, HBZ Bank from November 2005, Absa from March 2006, and Standard Bank from 2016). The paper sets out the core finance structures: Murabaha (a cost-plus sale where the bank discloses cost and profit margin to the client), Ijarah (lease finance with an option to acquire at the end of the term), Musharaka (bank and client both contribute capital), and Diminishing Musharaka — the structure typically used for property, in which the client gradually acquires the bank's equity in monthly instalments until full ownership transfers. On market size, the paper notes that BASA only began collecting Islamic-banking statistics in March 2019, and reports that as at March 2021 total Islamic-banking assets stood at 0.16% of total South African banking-industry assets. Over March 2019 to March 2021 it records that Islamic-banking deposits grew 41.51% (versus 15.16% for conventional deposits) and Islamic advances grew 49.71% (versus 7.86% for conventional loans and advances) — a small but markedly faster-growing segment.