South America isn’t known to be a popular region for Islamic finance. This has to do with the dominance of Christianity there and the comparably low number of Muslims – around 4mn – predominantly in Brazil and Argentina.
However, in the recent past, there have been some activities to conquer this bastion and approach it as a new frontier for Islamic finance in some smaller countries
The first foray Islamic finance has made on the continent was into Suriname. The Muslim population in Suriname is about 15% of the country’s total population, which is the highest percentage of Muslims in any country of South America. Last year, the Central Bank of Suriname approved Islamic finance products and services in the banking sector and the first Islamic bank in the country, as well as on the entire continent, Trustbank Amanah, started operations on December 7, 2017.
The launch was supported by the Islamic Corp for the Development of the Private Sector (ICD), a unit of Saudi Arabia-based Islamic Development Bank.
“While Islamic finance steadily expands in Asia, Middle East and Africa, South America is certainly a new market. Suriname will become the financial hub for Islamic Finance for the region,” said Nida Raza, head of advisory services department at the ICD. “Trustbank Amanah will play a prominent role in this,” she added.
The bank will focus particularly on financing for small and medium-sized companies in the country, as well as on the agriculture and health sectors. Another strategy is to support the industrialisation of Suriname and the opening of the nation’s first industrial park in Paramaribo.
The strength of Islam in Suriname has historical reasons. The faith came with immigrant labourers from Indonesia and South Asia at the time when Suriname was a Dutch colony. There is also a small number of Afghan Muslims in the country.
The other South American country opening up to Islamic finance is the former British colony of Guyana, also with support of the Islamic Development Bank. The background of Islam is similar to Suriname; the religion gained a foothold in the 19th and early 20th century with immigrants from then-British Pakistan and Bangladesh.
Currently, Islam is the third largest religion in Guyana after Christianity and Hinduism, and about 8% of the population is estimated to be Muslim.
The introduction of Islamic finance in Guyana is led by Jeddah-based Islamic Research and Training Institute, another unit of the Islamic Development Bank, which sees Guyana as a major oil and gas producer in the future when industrial development kicks in, and the country seems just ready to experience an economic boom.
While there is currently no regulation on Islamic finance in Guyana, and also no Islamic bank, the country in a first step received $900mn in financial and technical assistance from the Islamic Development Bank over a three-year period, commencing in 2018.
The money will be used for development of Guyana’s economic infrastructure, rural development, educational capacities and improvement of trade and competitiveness, and also to build up the country’s oil and gas industry. The establishment of Islamic banking institutions is planned for later.
Overall, experts agree that the expansion of Islamic finance in South America won’t stop in those two small nations. Brazil, which counts the largest number of Muslims in the region with many of them being wealthy immigrants from the Levant, including Lebanese and Syrians, is seen as the next frontier. Potential is also high in Argentina, Venezuela, Panama, Colombia, Paraguay and Trinidad & Tobago, countries which all have local Muslim communities that would happily embrace Islamic banking services.