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Islamic finance is a fast growing activity in world markets. This paper provides a survey on Islamic Finance in SSA. Ongoing activities include Islamic banking, sukuk issuances (to finance infrastructure projects), Takaful (insurance), and microfinance. While not yet significant in most Sub-Saharan countries, several features make Islamic finance instruments relevant to the region, in particular the ability to foster SMEs and micro-credit activtities. As a first step, policy makers could introduce Islamic financing windows within the conventional system and facilitate sukuk issuance to tap foreign investors. The entrance of full-fleged Islamic banks require addressing systemic issues, and adapting the crisis management and resolution frameworks. The IMF can play a role by sharing international experiences and providing advice on supervisory and regulatory frameworks as needed.

Finance --- Investments --- Banks and Banking --- Islamic Banking and Finance --- Other Economic Systems: Public Economics --- Financial Economics --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Banking --- Islamic finance --- Islamic banking --- Financial services --- Banks and banking --- Islamic countries --- Malaysia

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The money laundering (ML) and terrorist financing (TF) risks associated with conventional finance are generally well identified and understood by the relevant national authorities. There is, however, no common understanding of ML/TF risks associated with Islamic finance. Some are likely to be the same as in conventional finance, but there may also be different risks. This is notably due to: (i) the complexity of some Islamic finance products; and (ii) the nature of the relationship between the institutions and their clients. The limited capacity and experience in the supervision of Islamic finance, especially in jurisdictions that face higher ML/TF risk factors represents an additional vulnerability. The Financial Action Task Force (FATF) standards are implemented without any form of tailoring to the specificities of Islamic finance. The FATF, the Islamic finance standard-setters, and the national regulators should seek a greater understanding of the specific ML/TF risks that may arise in Islamic finance and develop an appropriate response.

Islamic Banking and Finance --- Criminology --- Other Economic Systems: Public Economics --- Financial Economics --- Illegal Behavior and the Enforcement of Law --- Finance --- Corporate crime --- white-collar crime --- Islamic finance --- Anti-money laundering and combating the financing of terrorism (AML/CFT) --- Financial services --- Crime --- Banks and banking --- Islamic countries --- Money laundering --- Iran, Islamic Republic of

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Islamic banks are prohibited from charging or paying interest, and thus can operate only on the basis of profit-sharing arrangements. This paper provides a brief survey of the theory and practice of Islamic banking. It covers developments in Islamic banking since the mid-1970s, how such banks operate, and the analytical underpinnings of a financial system based on Islamic principles. Finally, the future of Islamic banking is assessed.

Banks and Banking --- Finance: General --- Islamic Banking and Finance --- Other Economic Systems: Public Economics --- Financial Economics --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Other Economic Systems: General --- Banking --- Finance --- Islamic banking --- Financial instruments --- Commercial banks --- Financial services --- Financial institutions --- Banks and banking --- Islamic countries --- Iran, Islamic Republic of

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The paper provides robust evidence that compliance with Basel Core Principles (BCPs) has a strong positive effect on the Z-score of conventional banks, albeit less pronounced on the Zscore of Islamic banks. Using a sample of banks operating in 19 developing countries, the results appear to be driven by capital ratios, a component of Z-score for the two types of banks. Even though smaller on Islamic banks, individual chapters of BCPs also suggest a positive effect on the stability of conventional banks. The findings support the effective role of BCP standards in improving bank stability, whose important implications led to the Islamic Financial Services Board (IFSB) publication of new recommendations in 2015 to bring BCP standards in line with the Core Principles for Islamic Finance Regulation (CPIFRs) standards. Our findings suggest that because Islamic banks are benchmarked closely to BCPs, the implementation of CPFIRs should also positively affect their stability.

Banks and Banking --- Finance: General --- Islamic Banking and Finance --- General Financial Markets: Government Policy and Regulation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Comparative Analysis of Economic Systems --- Financial Institutions and Services: Government Policy and Regulation --- Other Economic Systems: Public Economics --- Financial Economics --- Financial services law & regulation --- Banking --- Finance --- Basel Core Principles --- Islamic banking --- Bank regulation --- Bank supervision --- Financial regulation and supervision --- Bank soundness --- Financial sector policy and analysis --- Financial services --- Banks and banking --- State supervision --- Islamic countries --- United Kingdom

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The relative financial strength of Islamic banks is assessed empirically based on evidence covering individual Islamic and commercial banks in 18 banking systems with a substantial presence of Islamic banking. We find that (i) small Islamic banks tend to be financially stronger than small commercial banks; (ii) large commercial banks tend to be financially stronger than large Islamic banks; and (iii) small Islamic banks tend to be financially stronger than large Islamic banks, which may reflect challenges of credit risk management in large Islamic banks. We also find that the market share of Islamic banks does not have a significant impact on the financial strength of other banks.

Banks and banking --- Banks and banking, Islamic --- Islamic banks and banking --- Non-interest banks, Islamic --- Religious aspects --- Islam. --- Banks and Banking --- Finance: General --- Macroeconomics --- Islamic Banking and Finance --- Other Economic Systems: Public Economics --- Financial Economics --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Personal Income, Wealth, and Their Distributions --- General Financial Markets: Government Policy and Regulation --- Banking --- Finance --- Islamic banking --- Commercial banks --- Personal income --- Financial sector stability --- Islamic countries --- Income --- Financial services industry --- Iran, Islamic Republic of