Islamic finance client benefits highlighted

Entrepreneurs can now bid farewell to interest rates on loans for their investments. This is one of the key initiatives Islamic finance brings into the Cameroonian business arena since its launch on 20th February in Yaoundé by Afriland First Bank.

Islamic finance which is open to Muslims and non-Muslims is a banking system and financial operation carried out in compliance with the principles and precepts of Islam.

Based on the principles of Islam, the Islamic financial institution advocate for the removal of interest rate on investment loans.

Thus, starting from the principle that, money is not supposed to be sold, it is "forbidden for any investment, even profitable ventures to pay interest on investment loans", explained Alphonse Nafack, Director general of Afriland First Bank.

Indeed, according to the Director General, the investment must retain only the principle of sharing profits and losses between the client and the Bank.

Islamic finance also discourages financing of illegal weapons, alcohol, cigarettes, pornography etc.

Several modes of funding are possible with Islamic finance. The first being the "murabaha" which is a contract of sale financed by the Bank at a profit margin agreed between the Bank and the customer.

There is also the "Ijara" which is the transfer of the usufruct (the right to the use property) of a particular property to another person or an entity in return for a payment or rent.

This funding is a solution for companies that seeks to use a property without necessarily buying that property.

With the "Musharaka", the Bank and the customer participate in the financing of an operation and jointly assume the risk of their participation.

The profits or losses are distributed between the client and the Bank based on fixed rates.

Finally, the "mudaraba", is a contract between the entrepreneur and a contributor of financial capital towards an invest.

The implementation of Islamic finance has begun to operate in Cameroon with the creation of account with a deposit of 2,000 for Muslim customers.

Between 2003 and 2014, the Ministry of Territorial Administration and decentralization and Afriland First Bank, as a one-stop shop, organized the pilgrimage of more 35,000 Cameroonian Muslims to Mecca.

Islamic finance is growing in Cameroon and other parts of the world with a total of assets valued between 1,300 and 1,800 billion dollars.