In July, the Tunisian parliament passed a law allowing the government to issue sukuk, enabling the finance ministry to raise $700 million later in 2013 and help close more than $3 billion of the budget deficit.
In the same month, Muhammad Mursi was ousted following a popular uprising against him in Egypt that was supported by the army.
During his troubled one year in office, Mursi tried to further the cause of Islamic finance by speeding up policies and procedures to allow the issuance of sukuk, enable Islamic finance companies to raise funds and reform Islamic endowments or funds.
For the time being it seems these issues are no longer a priority for the new economic and finance team as they clearly put it.
According to Finance Minister Ahmed Galal, the interim government had no problem in principle with using sukuk, but would not make them its principal instrument.
However, some analysts think that with the ouster of Mursi and his Muslim Brotherhood, the political backing for Islamic finance will no longer be there to boost support for various Islamic finance products to take roots.
This approach is wrong on at least two accounts: First, it links Islamic finance and for that matter the whole of Islam, with a specific political group.
Second, it assumes that the fact that Muslim Brothers are no longer in power will impact negatively on Islamic finance.
Regardless of the presence of the Muslim Brotherhood, Islamic finance is continuing its existence on its own out of sheer necessity and its ability to attract millions of depositors, who were keen to follow the principles of their religion in day-to-day life.
This is underlined by the fact that the volume of Islamic finance is estimated to be in the range of $1.3 trillion.
To add value, this massive amount of money is an available source of finance that is interest free. And because of this lucrative market many typical conventional Western financial institutions like Citibank, HSBC and Chase Manhattan have all Islamic finance windows to cater for the needs of some valuable customers and are able to tap a large pool of savings for a growing number of depositors who do not want to deal with conventional finance.
This demand led an explosion of Islamic finance institutions which, according to some estimates, are believed to have topped more than 2,000 from typical Islamic banking, insurance (Takaful), Islamic funds, mudaraba and sukuk.
That is why Egypt will continue to consider issuing sukuk as planned to raise some money even if not the $10 billion targeted by Mursi’s government.
The stalled talks with the International Monetary Fund (IMF) on the much talked about the $4.8 billion will press toward tapping other possible sources of finance.
Moreover, there is still some room for Islamic finance in Egypt as its share is estimated to be in the range of 5 percent of the fiscal activity against 25 percent in the more mature Gulf markets.
Also with some 85 million population, between 10-15 percent of them using some kind of banking service, potential growth remains good both in Islamic and conventional finance.
Depoliticization of Islamic finance will help address serious issues related to the actual practice and whether these practices really honor the ultimate goal of the Shariah.
For instance, microfinance has been adopted as a tool to enable the poor make a breakthrough and change their lives for the better.
Available figures show that only between $800 million to $1 billion out of a $1.3 trillion volume of the Islamic finance industry as a whole is directed for microfinance.
And that amount is serving only 1.3 million people out of the global Muslim population of more than 1.6 billion.
In other words, only around 1 percent of available financial resources are going to only less than 1 percent beneficiaries in the whole Muslim world.
Does this mean that Islamic finance in its present format favors the rich at the expense of the poor and to what extent other modes of finance like murabaha and mudaraba are really serving the ultimate goal of Islam.
That can only be answered in a less politicized environment when criticism against a political force like the Muslim Brotherhood is not taken as criticism against Islam itself.
Email: [email protected]