Finance islamique : Le prêt « à taux zéro », c’est du marketing, selon Dr Daouda Zouré, ancien économiste à la Banque mondiale

Islamic finance: The “zero rate” loan is marketing, according to Dr Daouda Zouré, former economist at the World Bank

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With a customer base of approximately 30,000 people, Islamic finance offers a range of services according to the need expressed by the customer and at a zero interest rate. Can a bank operate without interest? Is this a business strategy?

The Islamic branch called “Coris Bank Baraka”, as part of its operation, conducts financial and commercial activities in accordance with the rules and principles of Muslim jurisprudence, in particular the “chari’a”. It works according to five classified criteria. These are the prohibition of interest or usury (Riba), the prohibition of sectors deemed illicit such as alcohol, cigarettes, excessive armament, the prohibition of anything that is uncertainty, excessive speculation. Islamic finance is also backed by tangible assets.

And as a last resort, it is the principle of sharing profits or losses related to any financial transaction. “Islamic finance does not compete or compete with existing finance. It just opens up another way of offering finance to the people who benefit from it”, clarified the person responsible for the development of Islamic finance activities at the level of Coris holding, Yaya Sidibé. From this point of view, this finance is intended to be participatory, ethical and responsible. With this new financing solution available in all its branches, CBI wants to contribute to the development of the Burkinabè economy.

Aimed particularly at all those who wish to invest, save, lend or borrow in an ethical manner and in accordance with the moral code of Islamic finance, it carries out resource mobilization activities through the investment account, and the Murabaha account which is a product in which the client contributes his funds and the bank, with its expertise, strengthens them. Both divide the profits that will be generated as a result of the activity carried out. Then there are financing products such as Murabaha financing which is a buy-sell product. At this level, the agency proceeds to the cash acquisition of any property on the recommendation of the client and its resale to the client with a profit margin returning to the bank.

Alongside this, there are other forms of financing including IJARA which is leasing, transfer and sureties (…). This new solution does not forget the actors of the informal sector, reassures Mr. Sidibé. It also has products adapted to their location. The latter deposit their funds in the bank through the wadi’a Précaution account adapted to their situation. In addition, Coris Bank Baraka proposes to support them in the development of their business: acquisition of production equipment, transport equipment, stock of goods, etc. To subscribe, you must be bankable and have the necessary guarantees.

According to the business development manager, Yaya Sidibé, Islamic finance is intended to be an ethical and responsible solution for all (Muslims and non-Muslims)

Without interest rate

Paradoxically, Islamic finance remains unknown to players in the informal sector. The National Council for the Informal Economy of Burkina Faso (CNEI-BF) says it has no knowledge of Islamic finance. “We have never benefited from it and we do not know its terms. To apply for funds for our members’ activities, you must first know the fund. However, we are not aware of it”, confirmed the general secretary of the CNEI-BF, Saidou Zangré. However, he marked the council’s availability to receive this type of financing for the needs of the members, especially since the problem of access to financing is a primary concern for workers in the informal economy.

The person in charge of the development of Islamic finance activities assured that the agency complies with the regulations of the Central Bank of West African States (BCEAO). And it is in this that the financial institution has issued two instructions which govern the activity of Islamic finance. These are instruction 00203/2018 relating to the mode of operation of the activity of Islamic finance and instruction 00405/2018 relating to the various products of Islamic finance. With this innovation, the bank bears the interest.

It is therefore for the borrower a “zero rate” loan, repayable without interest. “There are no interest rates in Islamic finance. Instead, we generate profit margins that easily allow us to make our activities profitable. The rate of this margin is not known. It is negotiated. Also, we take into account the competitive environment in its fixing”, confided Mr. Sidibé. He immediately clarified the two concepts. According to him, the margin is the sum of a capital factor plus a labor factor, whereas interest is a surplus on a capital.

The flaws of Islamic finance

Can a bank operate without interest? We approached a former economist at the World Bank to remove any ambiguity. According to Dr. Daouda Zouré, the concept is good, but the feasibility is not possible as it is in contradiction with banking rules in general. “Even rates that are concessional outside, for example, banking regulations if you take the deposit rates in banks which are 5 to 6%, it is impossible for you to make rates outside of that. This is the somewhat difficult situation of the implementation of this institution. The question also of the interest in Islamic finance which is perceived in the principle of Islam makes the situation even more complex”, he underlined.

Countries like Senegal and Mali tried the experiment, but they quickly threw in the towel. According to Dr. Zouré, Islamic finance could work if only it is situated in another economic logic such as the concessional interest rates of 1.5% which make it possible to cover the bank’s expenses. Even with this, he wonders if it will not affect the profitability of the bank and at the same time cause internal problems. In any case, everything will depend on the upstream policy of the central bank and the financial policy of the country.

For the secretary general of the National Council for the Informal Economy, Saidou Zangré, the actors are unaware of the existence of Islamic finance

The former economist at the World Bank took the opportunity to make recommendations to the Burkinabe state. He asked him to play his role as an actor in the economy and to review monetary policy. “In the sub-region since independence, there are state banks that provide financing loans to citizens. At home in Burkina Faso, we killed all the state banks (BIB, etc.) through poor management. These banks have been taken over by the private sector,” he lamented.

The agency (CB Baraka) displays satisfactory indicators with regard to its customer base estimated at around 30,000 people. How has this funding been able to help them develop their activities? Our attempt to get in touch with one of the agency’s clients was unsuccessful. Would that mean that there are things left unsaid. What is the agency trying to hide from the public? As we close our article, these concerns have gone unaddressed. But never mind, “the best customers are non-Muslims”. So to say that Islamic finance is for everyone without distinction of religion.

Aïssata Laure G. Sidibé

Lefaso.net

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