Viability of Islamic Banking And Finance in South Africa: A Look at the Legal Framework And Governance

South Africa has a total Muslim population of more than 1 million people representing 2.1% of total population (Islamic Finance News, 27th October 2010), thus creating the demand for Islamic banking and finance. Though the concept of Islamic banking in South Africa can be traced back to several decades, the practical implementation only started in late 1980s with slow initial start up. Presently, while the industry is relatively modest in term to figures, Islamic banking is strategically important for economic development of the country. South African Islamic banking is set to expand at a rapid rate as the new players identify huge opportunity in the country. However, Islamic banks face a series of challenges in the South African market. Increasing competition, education and awareness, and legal framework are the significant challenges for all institutions in the Islamic banking markets. This paper looks at the challenges of the legal framework and governance in implementing Islamic banking and finance in South Africa.