Islamic finance inclusion in conventional financial system : the case for Mozambique

Abstract

Mozambique, a developing country located in the Southern-Africa and where Muslims are a minority, has recently manifested their intention to establish the necessary framework for the institution of Islamic Finance in the country. As a trend, the level of awareness, motivation, and acceptance regarding Islamic finance tend to increase and, at the same time, it has been acknowledged by the policy makers as a viable alternative to address Islamic financial inclusion. Sharï’ah (Islamic Law) defines an important role in the non-market/non-material decisions. Prohibition of harmful activities by the Sharï’ah to ensure economic and social justice (i.e. interest, cheating, extreme uncertainty, gambling, consumption of pork or alcohol, engaging in prohibited entertainment) safeguard the Muslims choice. Therefore, to what extent trade via mutual goodwill and with avoidance of usury can be accommodated in the existing conventional financial system that appeals to the Muslim community? The research attempted to address the following two aspects in Mozambique: the first part: evaluate the level of awareness towards the promotion of mutual goodwill in trade and the avoidance of riba (usury), the implications for a Muslim while exposed to usury, the existing sharï’ah-compliant alternatives and the current development across the world and especially in the neighbouring countries regarding the standards and regulations, evaluation studies and the implementation stages; As for the second part: it gives more emphasis on financial inclusion from the perspective of “voluntary self-exclusion” due to religious values in relation to the existing conventional financial services. Finally, the study objectively established a baseline to determine what is the current stage and the steps required to promote the financial inclusion of Islamic finance in the Mozambican conventional financial system in Mozambican.