Africa’s largest natural gas producer posted a 4.1% growth last year. The Bank of Algeria (BoA) maintained its nominal interest rate at 3%, unchanged since 2020. “Monetary policy remains accommodative,” comments the World Bank in its latest country report. In April 2023, Governor Taleb lowered reserve requirements to contain prices from 3% to 2%. Inflation, which hit 9.3% in 2023, eased to around 3% in April on lower food and import costs, but jumped up to 6.42% in July. While hydrocarbons still dominate the economy, the authorities and the BoA are focused on modernizing the banking system to boost private sector growth and investment. Significant milestones in 2023 include a new Banking and Monetary law, Algeria’s adhesion to the African Continental Free Trade Agreement (AfCFTA) and a reform of state-owned banks. Credit Populaire d’Algérie (CPA) became the first bank to list on the Algiers Stock Exchange, floating 30% of its shares in March. Banque de Développement Local (BDL) is expected to follow suit. Algerian banks are also increasingly scaling abroad, particularly in Europe and Africa. On the digital front, the central bank has made strides with the launch of a new website, enhancing the accessibility of its data and publications. Mobile payments saw significant improvements, particularly in terms of interoperability among digital payment solutions. However, further progress is necessary for Algeria to open up to global finance fully.

Tiago Dias’s first 16 months as governor of the National Bank of Angola (BNA) have brought about little cheer. Economically, it has been a season of turmoil. Gross domestic product (GDP) growth plunged to 0.7% in 2023 from 3% in 2022. Last year, Angola’s exports, 95% of which consist of oil, dropped substantially. Public debt increased to 73.9% of GDP compared to 56.1% in 2022, driven by a significantly weaker exchange rate. Inflation has risen to its highest level in the past two years, hitting 31% in June before falling slightly to 30.53% in August. The local currency, the Kwanza, has lost about 37% of its value in the past 12 months as the consumer price index marched steadily to a record level in August. For BNA, the macroeconomic chaos has called for firefighting, characterized by a considerable tightening of the monetary policy. Since the beginning of the year, the apex bank raised its repo rate 150 basis points to 19.5% in May, leaving it steady at its September meeting. Though inflation is forecast to remain elevated, BNA hopes the tightening sets the tone for a steady decline with a target of around 7% by 2028. While discharging its core mandates has proved challenging enough, BNA is also grappling with rising threats of cyberattacks. In January, it suffered an attack that was luckily mitigated without significantly impacting its infrastructure and data.

Despite being one of the Gulf countries with a small pool of oil to draw from, Bahrain’s economy is resilient. In 2023, Manama posted a 2.5% growth, while inflation stood at just 0.1%. With the local currency pegged to the dollar, the Central Bank of Bahrain (CBB) aligns its monetary policy to the US Federal Reserve’s. The CBB cut its one-week deposit rate to 5.75% in September after the Fed reduced its benchmark rate, and the overnight deposit rate to 5.5%. Governor Khalid Humaidan was appointed in February 2024, taking over after Rachid Al-Maraj’s nineteen years in office. A former BNP Paribas executive and CEO of Bahrain’s investment promotion agency, the Economic Development Board (EDB), Humaidan is expected to steer the CBB and the banking sector in supporting the country’s shift away from oil. Priorities will include developing and regulating fintech, Islamic finance and climate finance. It is too early, however, for Global Finance to evaluate his performance.

The principle of rotation catapulted Bangui to the helm of BEAC in March this year. A trained economist and computer expert, the Central African Republic national has been a BEAC insider for two decades. This makes him well-versed in the bank’s operations, particularly in balancing the interests of member states. His assumption of the governor’s office coincided with the Central African Economic and Monetary Community (CEMAC) marking its 30th anniversary. Reality shows the bloc has failed miserably in terms of integration. Members conduct a mere 4% of trade with each other, while the bloc ranks as the least developed and poorest in Africa. Bangui acknowledges the bloc is facing colossal challenges and has promised to consolidate monetary and financial stability to drive growth. In the immediate term, BEAC opts for an accommodative monetary policy stance due to relative stability. In June, it left the benchmark policy rate unchanged at 5% for the fifth time in a row, forecasting that inflation across the region will dip to a still high 3.9% this year. This was informed by low inflationary pressures at a rate of 4.5% in the first quarter. Though Bangui is not losing sleep on the monetary side, the state of the banking sector worries him. The capital adequacy ratio in the industry has plunged to 11.8%, meaning that many banks are severely undercapitalized. Government lending, on the other hand, has surged to 31% of total assets compared to 10% in 2015.

Dekop became the Bank of Botswana (BoB) governor in October last year, succeeding Moses Pelaelo. An economist with deep roots in public service, particularly in steering the country’s critical mining sector, Dekop’s one year in office has been a mixed bag of fortunes. On the negative, Botswana’s economy is under strain. GDP growth decelerated from 5.5% in 2022 to 2.7% last year and is forecast to nosedive further to 1% in 2024. The main factor has been a sharp decline in diamond production and mining activities. The weaker performance of the non-mining sectors and El Niño induced drought has exacerbated the situation. On the positive, the pula remained largely stable, depreciating by a marginal 1.8% in 2023. Inflation remains in the BoB’s band range of 3%-6% despite a sharp swing in July, hitting 3.9% in August, up from 2.8% in June. The BoB has assessed the risks to the trajectory to be balanced.

For this reason, the apex bank has continued its monetary policy easing stance. It cut its policy rate by 25 bps in August from 2.15% to 1.9%, following another 25-bps cut in June. Cutting the rate is expected to spur economic activity by further expanding credit to the private sector. Last year, the banking sector recorded an 11.4% credit growth to businesses with non-performing loans (NPLs) at a low of 3.7%.

The Economic Community of West African States (ECOWAS) is in a state of pandemonium. Burkina Faso, Mali and Niger have quit the bloc. They signed a treaty in July to become a confederation, the Association of Sahel States. Part of their economic integration plans involves ditching the regional currency, the CFA Franc. For the BCEAO, the unfolding developments do not augur well for the bloc’s monetary union endeavors. Coming when the creation of the eco, the desired future regional currency, is proving challenging and lengthy, navigating the murky waters is becoming a big test for Governor Brou. Despite reaffirming his support for the eco, Brou has primarily become an observer as member countries tussle. The BCEAO boss is, however, taking comfort from the stability on the macroeconomic front. In its three quarterly monetary policy meetings in March, June, and September, the apex bank has held its key rate unchanged at 3.5%. Inflation jumped to 4.1% in the second quarter from 2.8% in the first, in part due to increased costs of imported food items; the BCEAO forecasts inflation will average 3.7% for the year, exceeding its target zone of 1% to 3%. Economic activity also remains dynamic, with GDP growth projected to reach 6.1% compared to 5.3% last year. BCEAO is pushing to raise the minimum paid-in capital to $32 million in the banking sector to consolidate stability.

Egypt seems back on track after securing over $50 billion in support from international partners in early 2024. As a result, the Central Bank of Egypt’s (CBE) reserves soared to an all-time high of $46 billion this summer. In exchange for what many observers describe as a bailout, the CBE agreed to tighten its monetary policy and float the pound. Abdalla raised the deposit rate by 600 bps to 27.75% in March and maintained it at that record high in September. He also introduced exchange rate flexibility, which helped close the gap with the black-market rates but led to an immediate 40% drop in the Egyptian pound’s value. “Having two exchange rates has been a disease suffered by the country, and it was an economic risk that had to be confronted,” Abdallah told the local press. Although the governor claims not to “target a specific exchange rate,” the CBE had previously reversed devaluations when the pound dropped too low. For foreign investors, exchange rate stability is crucial, and the CBE’s ability to stick with this policy is pivotal to Egypt’s economic future. At home, Abdalla’s top priority is controlling inflation, which hit 33.9% in 2023, far exceeding the CBE’s single-digit target. Despite the reforms, inflation remained high at 26.2% in August 2024.

Nevertheless, Egypt’s banking sector stands strong. Local lenders are some of the biggest in the Middle East and Africa, and fintech as a means of financial inclusion is also one of Egypt’s strengths. A regulatory push from the CBE on topics like open banking or digital KYC could allow the sector to grow even further.

Mihretu ascended to the governorship of the National Bank of Ethiopia (NBE) with accolades for being progressive and reform minded. On this, he did not disappoint. In July, NBE made history with the launch of a new monetary policy regime that will be interest-rate based. In taking decisive action, the bank discarded the previous credit ceiling policy that had been criticized, including by the International Monetary Fund (IMF). The new regime, which aligns with global best practices, will be known as the National Bank Rate (NBR) and debuted at 15%. NBE reckons it will effectively anchor inflation and interbank forex trading and influence broader monetary and credit conditions. The new policy was one of the IMF’s conditions for a $3.4 billion bailout. Another was moving to a market-determined exchange rate. The new regime comes as Ethiopia grapples with the challenge of containing high inflation that fell to 17.2% in August, from 18.6% the prior month. The Birr is also under pressure after losing 5% value on the official market and 16% on the parallel market over the past year. In the banking industry, NBE is moving to tackle vulnerability through recapitalization. State-owned Commercial Bank of Ethiopia, heavily exposed to struggling state-owned enterprises, is among the first to recapitalize. 

The Central Bank of The Gambia (CBG) under Governor Saidy has been on an unwavering mission to bring down inflation, a key risk to economic growth. For this reason, the bank has maintained its policy rate at 17% since September of last year. This followed a cumulative 700 bps increase since March 2022. The tight monetary policy stance, which has seen the Gambia rank among the 10 African countries with the highest interest rates, has mixed effects. Inflation declined to 9.7% in July from 16.2% in January. The CBG projects a decline close to its target by the end of the year. The Dalasi is now stable after depreciating by 6.9% in the first quarter, while reserves amounting to $452.7 million in July are adequate. The moderating macroeconomic fundamentals are raising optimism in The Gambia’s economic prospects. CBG forecasts 5.7% GDP growth in 2024, a 0.2 percentage point upward revision from the May 2024 forecast. On the flipside, the tight stance has sent interest rates spiraling upwards. The effect has been a decline in credit to the private sector to 0.7% in June from 19.3% in March. The rates have also instigated a sharp rise in NPLs to 10.2% from 8.7% over the same period and 3.3% in the last quarter of 2023. Global shocks, regional conflicts and climate risks also pose threats to growth.

Addison, the Bank of Ghana (BoG) governor, has been on the lookout for the light at the end of the tunnel. Yet, no sign of light remains after two years of acute economic and financial pressures. Granted, the economic malaise is easing. A $3 billion IMF bailout and a deal with bondholders to restructure $13 billion worth of international debt has brought some relief and ignited an economic rebound. A key pointer is first quarter GDP growth of 4.7% compared to 3.1% last year. Though prospects point north, continuous stubborn inflation has forced the BoG to maintain a restrictive monetary policy stance. In January, the bank reduced its benchmark rate 100 bps to 29% and has held it unchanged in subsequent meetings. The impact has been a steady decline in inflation to 20.4% in August from 25% in April: well above the BoG’s target band of 6% to 10%. The central bank targets a rate of 15% by year-end. The Ghana Cedi is another source of headaches. The local currency has maintained a losing streak, depreciating by 19.6% over the seven months to July. Last year, it lost 22.1% value over the same period. While the economy is a mixed bag of fortunes, on the political front, the temperature is rising. In December, Ghana will head to the polls to elect a new president to succeed Nana Akufo-Addo. Though renowned for democracy and political stability, accusations of plans by the ruling party to rig the elections are sending shockwaves.

After decades of wars and crises, the Central Bank of Iraq (CBI) governor has much on his plate. One of the top priorities is economic diversification. Oil makes up 95% of government revenues, and global hydrocarbon prices influence the economy. In 2023, Iraq experienced a 2,9% recession, mainly due to OPEC+ production cuts, but growth is expected to pick up to around 4% this year. Governor al-Allaq is trying to push the non-oil economy through lending mechanisms for sectors like agriculture and industry. Another critical challenge is modernizing Iraq’s financial sector. In 2023, the CBI and the government introduced reforms to update the banking system, encouraging lenders to offer customers a broader range of services instead of focusing on imports and financing foreign trade. Restoring investor confidence is also a key focus. The banking system has been under international scrutiny due to reports of US-sanctioned entities accessing dollars through Iraqi lenders. Since 2022, 32 Iraqi banks have been banned from dealing in USD. Restrictions on foreign currency withdrawal and use have also been implemented. These measures have helped narrow the gap between the official and black-market exchange rates, but many loopholes remain. Tightened monetary policy, including a hike in the policy rate from 4% to 7.5% in June 2023, where it has remained, has also helped ease inflation, which nevertheless rose to 3.6% in June from 3.4% the previous month. Finally, global warming is a significant threat to Iraq’s economy and future.

Despite regional challenges due to the war in Gaza, Jordan’s economy is growing steadily. In 2023, GDP expanded by 2.6% and is expected to reach 3% in 2025. The current account deficit fell to 3.7% of GDP in 2023 from 7.8% in 2022. The IMF’s Extended Fund Facility, which began in January 2024, “is off to a strong start,” says the Washington-based institution, thanks to “sound macro-economic policies and structural reforms over the past few years.” The Jordanian dinar is pegged to the US dollar, and the Central Bank of Jordon (CBJ) cut its benchmark interest rate 50 basis points in September, in line with the Federal Reserve’s rate cut: the CBB’s first reduction since March 2022. Governor Al-Sharkas has kept inflation in check, with price increases falling to 1.9% in August. In October 2023, the Financial Action Task Force (FATF) removed Jordan from its Grey list, boosting investor confidence and acknowledging the CBJ’s efforts to combat money laundering and terrorism financing. “We will continue to effectively address emerging issues,” Al-Sharkas told the local press. The Jordanian banking system remains strong, profitable and resilient to external shocks. Last year, deposits increased by 34.5%, and credit facilities improved by 2.7%. In March, the CBJ unveiled its National Financial Inclusion Strategy 2028, which aims to foster sustainable growth, enhance public-private collaboration, and modernize the banking sector. The CBJ plans to increase financial inclusion to 65% from 43% and boost account ownership among small and medium businesses to 75% from 52%. Overall, Jordan’s economy is sound, but unemployment, over-reliance on foreign aid, and climate change remain important challenges.

Towards the end of last year and the beginning of this year, the Kenyan shilling was on an unprecedented freefall. In months, the local currency had moved from trading at KSh128 per dollar to about KSh170. Owing to the forex chaos and with Kenyans baying for his blood, Thugge found himself in a cage. The Central Bank of Kenya (CBK) governor, a seasoned economist, opted to maintain a cool head. He quickly implemented drastic measures, cutting across tightening the benchmark rate, inter-bank market interventions, and partial buyback of a $2 billion Eurobond. The dosage immediately affected the shilling, which took a U-turn from the worst performing in Africa to the best performing after a 16% gain in the first quarter. Amidst February’s pandemonium, the CBK hiked its policy rate by 50 bps to 13%. In August, the bank lowered the rate to 12.75%, a move informed by forex stability and declining inflation within the target bracket. In July, inflation hit a near four-year low of 4.3%, down from 6.9% in January, and rose only slightly to 4.4% in August. Though CBK continues to discharge its mandates effectively, Thugge has raised concerns that civil unrest and protests ignited by tax hikes and IMF-backed structural reforms could impact growth, projected at 5.4% in 2024.

One of the wealthiest countries in the world, Kuwait derives 90% of its revenues from hydrocarbons. As a result of OPEC+ production cuts, GDP contracted 2.2% last year, but should output volumes and prices increase, so will GDP. While the GCC is transforming exceptionally, political gridlock paralyzes Kuwait’s reform agenda. In May, the emir dissolved Parliament and suspended parts of the constitution to push reforms, including new taxes, debt legislation, fiscal consolidation and measures to stimulate private sector growth. At the Central Bank of Kuwait (CBK), Governor Al-Haroon is navigating these troubled times cautiously. In September, the CBK reduced its key discount rate by 25 basis points to 4% in response to the Fed’s move, its first rate cut since 2020. Inflation accelerated from 2.84% to 3% in July after hitting its lowest level since 2020 the previous month. Banks, the backbone of Kuwait’s non-oil economy, remain profitable, well-capitalized, and are armed with strong liquidity buffers. “Prudent regulation and supervision by the CBK has helped maintain financial stability,” the IMF states in its latest report. As Kuwait’s economic diversification agenda gains traction, banks will play a central role in the transition. Kuwait is expected to be the next GCC country to implement open banking.

Wassim Mansouri stepped in as acting governor in late July 2023, making it too early for Global Finance to assess his performance. Lebanon officially defaulted on its sovereign debt in March 2020 and is grappling with one of the world’s worst financial crises. The local currency, pegged to the US dollar until 2019, has lost over 98% of its value and inflation hit a record 221% in 2023; since then, it has been in retreat, hitting a low of 35.4% in July on easing consumer prices. The benchmark interest rate has remained at 20% since May of last year. The Lebanese largely blame Banque Du Liban (BdL) for implementing a Ponzi scheme that precipitated the country’s collapse, with Lebanese banks losing at least $70 billion. Mansouri now faces the daunting task of overseeing paralyzed and decried financial institutions. The top priority is how to distribute the losses. The last few years, local lenders have imposed informal capital controls, drastically restricting clients’ operations and access to savings accounts.

Consequently, banks are widely perceived as having stolen the people’s money. Another critical challenge is rebuilding the banking sector—deciding which banks can be bailed out and which ones need to file for bankruptcy or consolidate. Lebanon desperately needs international help, but negotiations have stalled due to a lack of political will to implement reforms. In September, former governor Riad Salameh was arrested in Beirut on embezzlement charges. 

For Andrianarivelo, implementing a new monetary policy framework was among his top priorities when he took over as Banky Foiben’i Madagasikara (BFM) governor in February of last year. On his first anniversary, the BFM operationalized a new interest rate targeting regime. The new framework will clarify interest rate settings, money market interventions, policy transmissions, and communication. The new policy regime is already having the desired impacts. After holding its benchmark rate steady, BFM increased the rate by 50 bps in August to contain persistent inflationary pressures. In July, the inflation rate stood at 7.5%, a small rise from 7.1% in January. With the tightening policy, the apex bank hopes to bring inflation down within the target band and stimulate more economic activities. Having recorded a 3.8% GDP growth in 2023, Madagascar is upbeat of a 4.5% expansion this year. However, ballooning public debt at over 60% of GDP, climate vulnerabilities, and slow growth of credit to the private sector could dampen growth. Though the banking sector remains stable, it has performed abysmally regarding financial inclusion. The banking penetration rate is currently at less than 30%, ranking the country among the lowest in sub-Saharan Africa.

In June, Mauritanian President Mohamed Ould Ghazouani secured another term after winning the presidential election with 56.12% of the vote. Being in a volatile region where the tide of jihadism has been spreading fast, the largely peaceful election was a plus for Mauritania. The election coincided with a period of macroeconomic stability. The events have translated into calm waters for the Central Bank of Mauritania (BCM). Inflation decreased sharply to 2.7% in May from 6.1% in the same month last year. The local currency, the Ouguiya, has continued to hold firm. While the stability has provided BCM with enough headroom for monetary policy easing, BCM has maintained its key rate at 8% since December 2022. Mauritania is buoyant, and its economy should maintain a growth trajectory in the current environment. This year, GDP growth is forecast to reach 4.3% from 3.4% last year. Non-extractive sectors, mainly agriculture and fisheries, are expected to drive growth. The country will, however, have to wait much longer for petrodollars following delays in the first gas from the Tortue project. To enhance stability in the banking sector, BCM has increased the minimum capital requirement for banks to $50.4 million and the core capital requirement to at least $75.7 million.

Seegolam has been the central player in Mauritius’ quest to become a credible and dependable international financial center since his appointment as governor in 2020. In July, the Bank of Mauritius (BoM) governor was accorded more responsibilities following his appointment as Financial Services Commission chairman. He will also be responsible for regulating the non-bank financial market. Undoubtedly, Seegolam has done a splendid job in regulating the banking industry. Today, Mauritius boasts of an industry that is not only vibrant but also resilient, with sound asset quality, liquidity buffers and a key driver of economic growth. With the new role and considering BoM’s ownership of Mauritius Investment Corporation, the country’s financial services sector is now under his grip. Even as he assumes the added duties, Seegolam has been keen to ensure the BoM remains steadfast on its critical monetary mandates. For nearly two years, the bank opted for an accommodative monetary policy stance, maintaining its key rate at 4.5%; in September, following the Fed’s rate cut, it reduced its benchmark interest rate 50 basis points to 4%. The prolonged policy stance is informed by the need to balance economic growth risks and inflation outlook. BoM has already managed to contain inflation to within the target band following a steady drop to 2.2% in June 2024 from 7.9% in the same period last year, although inflation moved back up to 2.7% in August.

Despite multiple shocks, Morocco’s economy is holding firm. In 2023, GDP grew by 3.2%, up from 1.5% in 2022. This year, performance should be slower due to weaker agricultural output. Nonetheless, years of structural reforms and careful economic planning are yielding strong results. Last year, Morocco stood out on global investors’ maps with over $20 billion announced greenfield FDIs, up from $3.8 billion in 2021. This shows the country has become an attractive business destination and opens opportunities for the future. Over the years, Bank Al-Maghrib (BAM), the central bank, has demonstrated a long-term, sustainable vision for Morocco’s financial sector without deviating from its mission to control price stability. After keeping interest rates low throughout COVID, Governor Jouahri hiked the main policy rate to 3% in February 2023. In the following months, inflation declined faster than in neighboring countries. The governor then lowered the policy rate by 25 bps to 2.75% in June of this year and expects inflation to drop to 1.5% by the end of the year; it stood at 1.7% in August. Moroccan banks are robust, with total assets representing 138% of GDP. They are also among the continent’s top financial institutions, increasingly scaling across different countries, especially in Africa. Regarding fintech and innovation, Morocco still lags behind Arab and African peers. The BAM, however, is forward-looking regarding climate change and how to translate this new reality into monetary policies.

Zandamela falls in the rank of governors reveling in a smooth sail in 2024. For the Bank of Mozambique (BoM) governor, it has been a year of easing the monetary policy. Throughout 2023, BoM left its MIMO interest rate unchanged at 17.25%. This year, the consolidation of inflation at single digits has set the apex bank on a path of cuts. In July, BoM cut the rate to 14.25% from 15%, bringing borrowing costs to their lowest level since 2002, according to Trading Economics. With inflation on a downward spiral, hitting 2.75% in August, the bank has signaled the cuts are bound to continue. IMF has lauded the easing as appropriate. However, the Bretton Woods institution wants improved transmission by deepening the interbank, money, and foreign exchange markets. This is critical in ensuring Mozambique’s economy remains on a solid footing. This year, growth is projected at 4.3% compared to 5% in 2023, driven partially by a liquefied natural gas bonanza. The government has moved to ensure transparency and sound management of the new-found wealth with regulations to govern the Sovereign Wealth Fund that will be domiciled at BoM.

The Bank of Namibia (BoN) has often depended on signals from the South Africa Reserve Bank (SARB) when deciding on its monetary policy repo rate. This emanates from the fact that the Namibia dollar is pegged to the South African Rand; Governor !Gawaxab has likened the one-to-one peg to a marriage. In August, the BoN decided a split was necessary. The bank reduced its benchmark rate to 7.50% from 7.75%; the rate has remained unchanged since June 2023. The decision came just a month after the SARB had elected to keep its repo rate unchanged at 8.25%. For Namibia, the moderating inflation meant policy easing was warranted to bolster the economy. Inflation stood at 4.6% in July, the same level as in June, but eased down to 4.4% in August. BoN forecast the rate to average 4.7% this year. The need to spur economic activity is critical. Growth has slowed due to the impacts of a severe drought, the worst in a century. Half of the population is facing starvation, forcing the government to take desperate measures. In late August, it announced plans to kill more than 700 wild animals to feed people. Apart from drought, sluggish performance of key sectors, particularly mining and a soon-maturing $750 million Eurobond, are adding to the economic pains. BoN has reduced its GDP forecast for 2024 by 0.6 percentage points to 3.1%.

It has been a year of pragmatism and boldness for Cardoso. The Central Bank of Nigeria (CBN) governor is walking the talk on his promise to return to orthodox policies. Cardoso was appointed in September of last year to clean up the CBN’s deep problems caused by his predecessor, Godwin Emefiele. A former Citigroup executive, Cardoso has not disappointed. One area stands out –steadfastness in using orthodox monetary policy tools to reign in stubborn inflation. In September, the CBN raised its main lending rate 50 basis points to 27.25%, the fifth consecutive increase this year. During this period, the rate has been hiked 850 bps from 18.75%. The CBN reckons aggressive tightening is necessary. Inflation remains persistently elevated, hitting a 28-year high of 33.4% in July, up 3.5 percentage points from January, although it eased to 32.15% in August. For its part, the Naira has been oscillating in and out of murky waters despite measures to tackle forex market distortions. Stabilizing the macro fundamentals is critical in realizing a 3.3% GDP growth in 2024, compared to 2.9% last year. The CBN has also been busy in the financial sector. Despite the industry being stable, asset quality is deteriorating, prompting the bank to take action, revoking the licenses of 132 insolvent microfinance banks last year.

In 2023, Oman’s economy grew by 1.6%, down from 9.6% the previous year, a drop mainly due to OPEC+ oil production cuts. The country is implementing subsidy cuts, new taxes, and privatization reforms to reduce reliance on hydrocarbon revenues. The authorities plan to list around 30 state-owned companies over the next five years. Oman is also reorganizing the management of public assets by creating mega entities including the Oman Investment Authority to increase efficiency. At the Central Bank of Oman (CBO), Executive President Al-Amri’s main task is supervising local banks and maintaining price stability during this transition. The CBO lowered its key repo rate for local banks by 50 basis points to 5.5% in September, on the heels of the Fed’s similar cut. In August, the annual inflation rate dropped to 1.1%.

“The CBO is generally an early adopter of international regulations. It has a sound record of taking proactive and corrective actions to reduce banks’ vulnerability to financial crises. Omani banks also benefit from a stable core deposit base, with limited reliance on external funding,” S&P says. While Omani lenders are modest in size compared to GCC peers, overall, the banking sector is sound. On the innovation side, Oman joined the GCC central banks’ Afaq payment system to facilitate real-time transactions in local currencies. The CBO also licensed its first international fintech (Paymob), paving the way for other companies to step in.

Qatar’s economy is stabilizing after the 2022 FIFA World Cup frenzy. Growth stood at a modest 1.3% in 2023, but Doha’s future remains bright, with the North Field Expansion Project expected to more than double the emirate’s liquified natural gas (LNG) production by 2030. Qatari banks are well-capitalized and some of the largest in the MENA region. In late 2023, Qatar launched its third National Development Strategy to further modernize the financial sector. Governor Al-Thani, who also chairs the Qatar Investment Authority—the country’s $450 billion sovereign wealth fund – spearheads initiatives to improve financial markets, promote innovation and develop the insurance sector. His core mission remains price stability. Like most GCC currencies, the Qatari riyal is pegged to the US dollar and the Qatar Central Bank’s (QCB) monetary policy moves in sync with the Fed’s. In September, the QCB followed the Fed’s lead in lowering its lending rate 55 basis points to 5.7%. Inflation has eased dramatically this year, dropping to 0.22% in August, down from 2.7% in February. “Continued prudence in macroeconomic and financial sector policies will further strengthen Qatar’s resilience amid elevated global uncertainty and geopolitical tensions,” comments the IMF in its latest country assessment. Over the years, the QCB has adapted its regulatory frameworks to welcome digital innovation. In June, it announced a new central bank digital currency project based on artificial intelligence and distributed ledger technology aimed at settling large payments with local and international partners.

Rwangombwa holds the distinction of being the longest-serving governor in Africa. For the 11 years he has been at the helm, the National Bank of Rwanda (BNR) governor has been instrumental in the bank’s transformation. During the commemoration of the BNR’s 60th anniversary in June, Rwangombwa was assertive that the bank is today fit for purpose and following best global practices on monetary policy trends. This fact has been at play this year. After a period of tightening last year, the BNR has responded to a stable trend in inflation with monetary policy easing. The bank cut its benchmark rate by 50 bps to 6.5% in August; it was the second consecutive reduction following a similar move in May. In August, the annual inflation rate was at 1.7%, according to Trading Economics, despite higher consumer prices: well anchored within the target range and expected to remain stable in the medium term. Though under pressure, the depreciation of the Rwandan franc has been moderate. The declining interest rates are sparking growth in credit to the private sector, a critical development in sustaining stellar GDP expansion. In the first quarter, the economy expanded by 9.7%.

Last year, Saudi Arabia hit a 0.8% recession due to OPEC+ oil production cuts. Non-oil GDP grew by 3.8%, indicating that the kingdom’s Vision 2030 blueprint to diversify away from oil rent is starting to show results. As the Arab world’s largest economy transforms at an unprecedented pace, Ayman Al-Sayari, who took office as governor in February 2023, oversees price stability and spearheads modernization of the financial sector. In September, the Saudi Arabian Monetary Agency (SAMA), the central bank, dropped its repo rate 50 basis points to 5.5% following the Fed’s similar cut. Last year, inflation stood at 2.3%; it has retreated under 2% this year, registering 1.6% in August.

Following a wave of consolidation, Saudi banks have emerged as some of the largest and fastest-growing in the MENA region. In 2023, the total assets of Saudi finance companies increased by 13%, the SAMA reports. While the riyal’s peg limits the governor’s action on monetary policy to the US dollar, Al-Sayari took measures to stabilize liquidity expansion and better manage public deposits with commercial banks through an auction-based mechanism. The governor also supervises the kingdom’s financial innovation goals and the entry of foreign players into the Saudi market. Saudi Arabia aims to attract 500 fintechs, creating 18,000 jobs by 2030 as part of its ambition to become a digital hub. So far, around 200 financial tech firms have generated some 5,000 jobs, according to the authorities. The Saudi Arabian Monetary Agency has its own Innovation Hub to channel this momentum, which looks at technologies like a distributed ledger or artificial intelligence, a regulatory sandbox, and an Open Banking Lab. It is constantly upgrading regulatory frameworks to accommodate new products and services. 

In November, Kganyago will begin a new five-year term as governor of the South African Reserve Bank (SARB); he was reappointed to the position he has held since 2014 primarily to “ensure continuity and institutional stability.” Kganyago has proved a steady hand in steering the SARB even in tough times. Today, South Africa’s economy remains in the doldrums. Despite a renewed sense of optimism following the formation of the Government of National Unity, the country faces an uncertain future. In the first quarter, the economy contracted by 0.1%. In 2024, South Africa would be lucky to attain its projected 1.2% GDP growth rate; the SARB has been explicit that economic performance is “disappointing.” Though most contributing factors are beyond its reach, the apex bank effectively discharges its mandates to stimulate the economy. After holding its key interest rate at 8.25% since May of last year, the SARB lowered it 25 basis points in September: its first easing since the 2020 Covid pandemic, according to Trading Economics. With inflation steadily declining, hitting 4.4% in August, additional rate cuts could be in the offing. As part of modernizing the financial sector, the SARB has released a digital payments roadmap. The goal is to remove obstacles, increase accessibility and usability and unlock the full potential of digital payments.

Tutuba, the Bank of Tanzania (BoT) governor, enjoyed a prolonged honeymoon in his first year in office. This year, however, the ballgame has been different, with battles on many fronts. Some of these have been with politicians pushing for removing the tenure limits for commercial bank chief executives. Currently, the limit is 10 years. Tutuba resisted the push. BoT has also faced criticism over awarding a banknote reprint tender, with Tutuba being forced to defend the process. These battles have shaken his grip on the apex bank at a time when the BoT is hoping for effective implementation and transmission of its interest rate-based policy framework, which came into effect at the beginning of the year. With the new regime, the BoT intends to influence economic conditions more precisely. Having set the benchmark policy rate at 5.5% in January, BoT hiked it to 6% in April and left it unchanged in September. Transmission is proving effective with inflation contained below the 5% target; in July, the inflation rate stood at 3.1%. With the shilling showing signs of holding stable after falling 11.2% year-on-year by the end of April, adequate reserves and a narrowing current account, Tanzania is buoyant with stellar growth. GDP is projected to expand by 5.4% in 2024.

Tunisia is navigating a severe economic and financial crisis. In 2023, GDP growth was a mere 0.4%, inflation rose to 9.3%, and unemployment rose to 16.4%. President Kais Saied appointed Fethi Zouhair Nouri as governor of the Central Bank of Tunisia (BCT) in February 2024, shortly after negotiations for an IMF loan failed and the government took a controversial decision to request $2.2 billion in interest-free loan from the regulator to pay off the country’s foreign debt. This is the first time the BCT has filled the public budget deficit. Although Tunisia avoided default in 2023, observers argue that meeting this year’s financial obligations will prove even harder, as the country needs to secure another $4 billion. The benchmark interest rate hit 8% early last year and has since remained at that level; the BCT decided to keep it there in July. Inflation has been dropping steadily since last year, declining to 6.7% in August. An economics professor, Nouri has been a BCT board member since 2016. It is too early for Global Finance to review his policies, but challenges ahead are plenty, in particular the central bank’s ability to maintain its independence.

In recent months, the Bank of Uganda (BoU) has focused on streamlining the financial sector. Having issued stringent new paid-up capital requirements for banks in November 2022, BoU has been on a housecleaning mission to enhance stability. Most of the country’s 25 banks have complied with $40.3 million paid-up capital for Tier 1 banks and $6.7 million for Tier 2 lenders. One bank, however, has been closed, while three Tier 1 lenders have been downgraded. The BoU reckons the housecleaning was necessary for a sector grappling with low credit growth and high NPLs. The upside risk of inflation forced BoU into a tightening monetary stance early in the year before resorting to easing. In August, Deputy Governor Atingi-Ego cut the bank’s benchmark rate by 25 bps to 10% as inflation moderated. That month, the inflation rate dropped to 3.5% from 4%, and the BoU expects it to stay below 5% in the coming months. PwC, one of the world’s Big Four accounting firms, reports that Uganda is among the fastest-growing economies in Africa; GDP growth is projected at 6% this year and could hit 7% in the medium term, driven by increased oil and gas industry investments and rising agricultural exports.

The United Arab Emirates (UAE) is experiencing solid GDP growth, expected to register at 4% in 2024. One of the world’s top oil exporters, the UAE was the first GCC country to diversify its economy; today, non-oil sectors account for over 70% of GDP. Since 1997, the dirham has been pegged to the dollar and the Central Bank of the UAE’s (CBUAE) monetary policy moves in tandem with the Federal Reserve’s; in September it followed the Fed’s lead, cutting the rate on its overnight deposit facility by 50 bps to 5.4%. Inflation declined sharply in July to 3.32% from 3.85% the previous month. Already some of the biggest in the MENA region, Emirati banks continue to thrive with projects at home and a broad customer base of global high-net-worth individuals. Often described as a fiscal haven, the UAE was removed from the Financial Action Task Force’s grey list in February, highlighting the authorities’ efforts to combat financial crime. The CBUAE also regulates hundreds of financial firms including some of the world’s top banks that have set up shop in Dubai and Abu Dhabi. A regional fintech leader, the UAE continues to embrace new technologies under close CBUAE supervision. These last few months, the central bank introduced new regulations on “payment token services”: essentially setting a roadmap for crypto where Dirham-based coins are preferred over foreign instruments like Bitcoin. It also launched a framework that “established global standards for open finance” and “empowers consumers to obtain the best financial solutions,” Governor Balama told the local media.

Kalyalya is facing his biggest test as governor of the Bank of Zambia (BoZ). A local currency that has lost significant value and continues downward, along with inflation moving further away from targets, is adding to the pain of an unrelenting economic crisis in Zambia. The freefall of the Kwacha is of particular concern. Over the past five years, it has lost half its value against the dollar. In the first quarter of this year, it depreciated by 10.6% before moderating at 3.8% in the second quarter. In the third quarter, it weakened by 6%.

The nosedive is forcing businesses to discard the kwacha, preferring the dollar. Fears of dollarization of the economy have forced the BoZ  to defend the Kwacha as the main medium of exchange. But the bank’s inability to arrest the currency’s freefall is just one of Kalyalya’s headaches. The other is inflation, which rose 15.5% in August. Moving further from the target band, inflation has seen the BoZ maintain a tight monetary policy. In May, the bank hiked its policy rate by 100 bps to 13.5%, the highest since 2017, keeping it unchanged in August. For Zambia, which is grappling with a severe drought and remains in a debt crisis, the challenging macro fundamentals intensify the pains of a battered economy. Growth projections for 2024 have been revised downwards to 2.3% from 4.7%.

Soon after being appointed Reserve Bank of Zimbabwe (RBZ) governor in March, Mushayavanhu made a candid admission – the market had lost confidence and trust in the credibility of the RBZ. Therefore, continuing with business as usual didn’t make sense. A former banking executive, Mushayavanhu is making bold moves to regain the central bank’s credibility. In April, one major decision was to introduce a new currency, the Zimbabwe gold (ZiG), replacing the worthless local dollar. The ZiG ended a bout of forex havoc that saw the Zimbabwean dollar depreciate by 260% in the first quarter. The Reserve Bank of Zimbabwe  (RBZ) also scrapped the issuance of gold coins his predecessor, John Mangudya, introduced. Another action was the recalibration of the monetary policy framework. In April, the bank slashed the benchmark rate to a still-high 20% from 130%, and has held it at that level since then. The tight policy stance and the gold-backed ZiG have turned the tide on inflation; in July, the new currency’s month-on-month inflation rate was -0.1%. To ensure sustained stability, the RBZ is stockpiling gold. In Mushayavanhu’s first 100 days in office, the bank increased its bullion reserves by 30%, hitting $370 million.

Mushayavanhu is already earning the trust of the market. However, the jury is still out on whether the Reserve Bank, which is prone to interference, will enjoy full autonomy under his watch. Notably, he has been a close business associate and friend of President Emmerson Mnangagwa and has links with the ruling Zanu-PF party.

Global Finance: Iraq went through decades of wars and crises. How did that impact the Iraqi banking sector?

Ali Muhsen al-Allaq: The banking sector faced severe headwinds starting with the Iraq-Iran war of 1980-1988, which damaged the country’s financial stability and the banks’ ability to service internal debt. With the 1990’s crisis and the Kuwait war, the dinar’s value then collapsed on the parallel market. That created a major challenge for banks in settling deposits and loans, ultimately undermining public confidence in the banking system.

More recently, the fall of the former regime coupled with terrorism, the war against the Islamic State, and ongoing security and political unrest directly impact banks’ ability to attract savings. In times of uncertainty, particularly during displacement in war-torn areas, individuals tend to hold onto cash.

On the other hand, Iraq’s isolation from the rest of the world, starting in the 1990s, resulted in a large technological gap. This is particularly true of state-owned banks, which inherited problems from previous decades. They find themselves unable to keep up with the recent challenge of building a solid private sector to help diversify the economy.

GF: What is the top priority for the Central Bank of Iraq currently?

Al-Allaq: Our primary objective is to maintain price stability while also promoting sustainable development. The CBI is continuously trying to balance its economic responsibilities in light of the inflationary waves currently impacting the global economy, which have a severe impact on the cost of living for low- and middle-income households. Given Iraq’s reliance on imports, the CBI works hard to stabilize prices by controlling liquidity levels. The central bank also supports economic growth by financing projects that stimulate local production and reduce imports. Finally, the CBI also drives banking sector reform and promotes financial inclusion through electronic payments to deepen the overall level of banking services in Iraq.

GF: What are the main challenges facing the central bank?

Al-Allaq: Iraq’s delay in keeping pace with technology, due to prolonged security and political crises, has made banking sector reform a top priority for us. Because reform takes time, we have set the stability of exchange rates as a first, and very challenging, intermediate goal. The ongoing crises have eroded public confidence in the banking sector, reducing the impact of action on interest rates on the real economy—a crucial tool for all central banks, especially during inflationary periods.

Additionally, the low level of financial depth, the prevalence of an unregulated small and midsize enterprise [SME] network and the heavy reliance on the oil sector exacerbate structural imbalances. That makes our country vulnerable to external shocks, leading to increased budget deficits and rising internal public debt, all of which further weaken the impact of monetary policies on the real economy.

GF: The Iraqi banking sector is under international scrutiny, with concerns that some countries sanctioned by the United States access US dollars through Iraq. How do you combat fraud and money laundering?

Al-Allaq: The central bank is striving to strengthen Iraqi lenders through various measures including intensified controls, procedures and inspections targeting banking and non-banking financial institutions, and the establishment of an AML/CFT and a compliance office in Baghdad. To ensure a high level of compliance with global regulatory standards, we also contract with specialized international companies to pre-audit foreign transfers, restrict the delivery of US dollars to travelers at Iraqi airports and conduct enhanced internal processes regarding all transactions in foreign currencies.

GF: How can the Central Bank of Iraq help diversify Iraq’s economy?

Al-Allaq: One of our primary goals is to promote sustainable development by supporting bank liquidity and directing it toward private sector projects. In 2015, the CBI launched two key initiatives: the One Trillion Initiative to finance small and midsize enterprises through commercial banks, and the Five Trillion Initiative to fund large projects via specialized banks. These efforts have expanded to include a one trillion dinar [$770 million] initiative for renewable energy, aimed at addressing our country’s electricity challenges and climate concerns.

These initiatives are designed to develop the non-oil sector and drive economic diversification. As a result, non-oil GDP grew by 4.4%, reaching 87.7 trillion dinars in 2023, driven by growth in manufacturing, construction, trade and services. Additionally, the central bank’s National Strategy for Bank Lending has further supported economic diversification by organizing funding for private sector projects.    

Finding solutions to an ever-expanding climate crisis is a global dilemma, but especially in Africa.

Despite contributing just 4% to global greenhouse gas emissions, the continent is disproportionately impacted by global warming. To cope, Africa is expected to need close to $3 trillion in investment by 2030. Yet, current commitments stand at only about $300 billion, leaving a vast gap.

Since the majority of African countries are already cash-strapped and heavily indebted, most of the existing funds come from abroad through development banks or multilateral mechanisms like the UN Green Climate Fund and the Loss and Damage Fund established last year at COP28. Local and regional commercial banks, too, are gradually increasing their participation in green finance.

“There has been a noticeable shift in the mindset of stakeholders across the African banking sector,” says Rachael Antwi, group head, Sustainability & ESG, Climate Finance at Ecobank, one of the main pan-African lenders. “Initially, there was a tendency to view climate action as a secondary concern, often overshadowed by more immediate economic challenges. However, this is rapidly changing as the impact of climate change becomes more apparent with extreme weather events, resource scarcity, and food insecurity.”

Nonetheless, lenders remain cautious about backing climate projects they often perceive as expensive, high-risk and low return.

“The largest funding gap is in adaptation, which refers to ensuring resilience against the impacts of climate,” says Kenny Fihla, deputy chief executive of Standard Bank Group. “Most often, projects are not seen as commercially bankable or feasible and require innovative solutions.” Standard Bank, Africa’s largest lender, aims to mobilize $14 billion in sustainable finance by the end of 2026.

A European Investment Bank (EIB) study found that while 66% of sub-Saharan African banks view green finance as a growth opportunity, only 15% have tailored products to tap into the market. Combining public and private capital is therefore emerging as a key factor in addressing the challenges ahead.

“To scale further, we need more collaboration between development finance and private finance,” argues Johan Malan, principal of Sustainable Finance Solutions at Nedbank, Africa’s fourth-largest bank, noting that blended finance offers advantages in risk mitigation and pricing.

Collaboration also bolsters the expertise needed to better structure and develop large-scale projects.

“Development finance institutions or donor funding may be catalytic in getting projects to a bankable phase,” notes Fihla. “Guarantees or insurance wraps may render projects commercially bankable or reduce costs of funding such that private sector appetite can be crowded in.”

Several types of blended finance are currently being used to support climate initiatives across the continent, including concessional loans, green bonds, technical assistance grants, intermediated lending and equity investment.

“A lot of funds are popping up across Africa to invest in climate transition, particularly renewable energies,” says Aliou Maiga, regional industry director for the Financial Industries Group at the International Finance Corporation (IFC). “The demand is growing fast. Why? Because it’s often easier for a small team of experienced people to get together and do this business than to convert a large bank.”

The IFC is actively involved in several funds, including a $20 million investment in IHS Kenya for green housing, $15 million in BIX Capital for production and distribution of climate-smart home appliances and $45 million in a green bond Sima Solar, which invests in off-grid solar projects.

The EIB, too, is active; last year, it invested over $350 million in Africa-based green funds including Mirova Gigaton and Acre Export Finance. In August, Helios Investment Partners, a London-based leader in private equity for Africa, raised $200 million from institutional investors to set up CLEAR, Africa’s largest climate fund with a $400 million target to support local startups and companies specializing in climate action.

The one sector investors all have eyes on is renewable energy. On a continent where over 600 million people lack access to electricity, the hope is that new technologies can help users leapfrog from zero power to solar energy without connecting to a national grid: a transition similar to the one that millions of Africans have made from cash-based economies to digital money, skipping traditional banks. 

Amid geopolitical insecurity and the collapse of traditional energy companies, economies in the Sahel are naturals fits for adopting renewable energies, Maiga argues, noting the rapidly expanding number of solar panels and batteries.

“Two years back, maybe I would have said Africa was not ready,” he observes, “but now I see an opportunity for the continent to leapfrog in the energy sector the same way it did in the mobile sector. Every country has its own context, but generally everyone is moving in that direction.”

Other promising areas for nimble startups include sustainable agriculture and irrigation, transport, recycling and smart construction. Last year, Africa-based climate tech enterprises raised $1.1 billion, according to regional network Africa: The Big Deal. In the first half of this year, it captured 45% of all funding raised by African startups, outpacing fintech.

Notable deals over the past few months included solar energy provider d.light, raising $176 million in July; electric vehicle maker Spiro, securing $50 million; agricultural insurance firm Pula, with $30 million in May; and SunCulture, a manufacturer of solar-powered water pumps, with $27.5 million in April.  

While other players are looking to assume a role in African climate finance, largely undefined regulatory frameworks, rules and criteria force them to improvise.

“Today in the business of green economy and climate finance, every institution, commercial banks included, is trying to find out where it fits and the traditional way of banking is not going to cut it,” says Ibrahima Cheikh Diong, UN assistant secretary general and director general of the African Union’s African Risk Capacity (ARC) Group. “One has to think outside the box.” 

Most jurisdictions have no specific guidelines or regulations for climate finance, leaving it up to the banks to follow international best practices, such as the International Capital Market Association’s principles for green bond issuance. Mandatory rules may be in store, however.

“Like elsewhere in the world, there is a trend of regulations starting as voluntary and then becoming mandatory,” Malan observes.

The continent’s largest economies, which also have the most developed banking sectors, are leading the way. In April, the Bank of Morocco and the World Bank released a report assessing the impact of climate change on the financial sector. A third of Moroccan banks, it found, are exposed through loans to sectors like agriculture and households in high-risk areas. It also offered recommendations on how to integrate climate risks into institutions’ strategies and policies.

Early this year, South Africa passed a first climate change bill, setting out a road map for climate action. In 2022, Africa’s largest economy had already issued a green taxonomy; since then, the South African Reserve Bank has published guidance on disclosure and climate-related risk management.

“That’s quite a big move and it also sets the tone for what is happening in other African countries,” says Malan.

“The African banking sector is increasingly acknowledging the significant challenges posed by climate change, recognizing both the economic and financial risks it entails,” notes Ecobank’s Antwi. “Moreover, by pricing in climate risks, banks are better positioned to protect their portfolios from potential losses, ensuring greater financial stability.”

These steps are crucial to creating a regulatory environment that builds investor confidence and supports growth, but they need to be sustained.

“Banks have to be very strategic in making sure that climate finance and investment are embedded in their strategies and are not just ad hoc interventions,” warns Diong.

Despite the urgency, only about 3% of global climate finance currently reaches Africa.

“There is still a long way to go, but we’ve also achieved a lot,” Malan concludes. Looking ahead, he sees potential for further growth in sustainable finance, climate debt swaps, and nature-related instruments.

Last fall, as conflict erupted in Gaza, Egypt’s economy, already weakened by the Russia-Ukraine war and the Covid-19 pandemic, teetered on the brink of collapse. By early 2024, the Arab world’s largest country faced the risks of regional conflict on its Sinai border and default on its foreign debt, prompting urgent recovery measures.

The first lifeline came from the United Arab Emirates (UAE). In February, ADQ, Abu Dhabi’s sovereign fund, signed a $35 billion deal, including $11 billion in existing UAE deposits at the Central Bank of Egypt (CBE), to develop Ras el-Hekma, a new Mediterranean tourism hot spot. Shortly thereafter, the International Monetary Fund and the European Union each pledged $8 billion aid packages, with the World Bank adding another $6 billion.

“The size of the investments was huge and allowed Egypt a second shot at stability,” says Thys Louw, emerging market debt portfolio manager at Ninety-One, the London-based South African investment manager.

The timely injections rejuvenated investor confidence. In the weeks following the financial rescue, foreign buyers rushed to Cairo’s debt market, buying one-year treasury bills and other short-term bonds and seizing new opportunities across multiple sectors. The authorities say the Ras el-Hekma project alone could draw in up to $150 billion in investments.

The latest IMF agreement came at a price; Egypt committed to exchange-rate flexibility, fiscal discipline, a slowdown in infrastructure spending, and measures to encourage private-sector growth. In March, the CBE raised its main policy rate by 600 basis points to 27.75% and floated the currency. The Egyptian pound dropped 40% that day, but the CBE stuck by its decision.

Business circles remain hopeful that the bailout can drive long-term reform.

“The recent efforts by authorities to restore macroeconomic stability have had a positive effect on investor confidence and private-sector sentiment,” comments Omar El-Husseiny, head of the Treasury Group at Commercial International Bank (CIB), one of Egypt’s biggest private lenders. “The government’s implementation of various policies and initiatives to attract foreign direct investment has focused on sustainable growth and reducing investment barriers, increasing investors’ appetite.”

Overall sentiment is gradually improving “in light of the stabilization of the exchange-rate situation and the disinflation path shown in the past few months,” says Mohamed Abou Basha, managing director and head of Macroeconomic Analysis at EFG Hermes Research. “Reduced interest rates and structural policy changes are the key next step to boost investor confidence.”

Privatization is another major challenge in a country where the state and the military still control large sectors of the economy. To attract foreign currency and boost local market competitiveness, authorities agreed back in 2022 to sell stakes in 32 state-owned businesses, including Telecom Egypt, luxury hotels in Cairo, water-bottle manufacturer Safi, gas firm Wataniya, and financial institutions including Banque du Caire, Arab African International Bank, and United Bank of Egypt. Last year, foreign direct investment surged to nearly $10 billion, the highest level on record.

Gulf states’ sovereign wealth funds and banks have been the main buyers, followed by European companies like Denmark’s Maersk, which announced last fall it would acquire a 51% ownership in the Zafarana wind farm complex, and the UK’s Actis, which is in the process of acquiring another wind farm, Gabal el Zeit. Notably, US investors are also stepping up. In May, Philip Morris bought a 14.7% share in Egypt’s Eastern Tobacco, while Carlyle Group is looking to secure hydrocarbon assets.

“Egypt’s diverse sectors, including tourism, education, health care, infrastructure, and green energy, present significant opportunities for foreign investors,” El-Husseiny says. “These sectors continue to offer substantial growth potential.”

So far, about half of the planned privatizations have actually gone through. A few more are expected to be finalized by the end of the year, but the government, which initially set a privatization target of $6.5 billion for 2024, has since downsized its ambitions.

“It wasn’t just lip service, but the question is, after this first phase, is there going to be impetus to do a second phase?” says Louw. “With this [Ras el-Hekma] deal essentially being organized from the top, this gives the authorities even less incentive to continue with privatization.”

Despite persistent challenges, Moody’s, Fitch, and Standard & Poor’s have all upgraded Egypt’s outlook to positive in recent months. The IMF forecasts 3% GDP growth for 2024, with inflation expected to decline after reaching 38% last year.

The Ras el-Hekma deal has given Egypt’s economic prospects a boost, but serious questions remain, including about the government’s ability to manage the structural account deficit and achieve debt sustainability. With the prospect of another billion-dollar property deal with Saudi Arabia, which could further fill state coffers and buy time, the issue question now is whether the authorities will use the additional breathing room to implement reforms as promised.

Throughout the financial crisis, however, Egypt’s banking sector has remained robust. Local banks, buoyed by high interest rates, reported record earnings last year. Bank assets and capital adequacy ratios are solid, with the top five banks capturing 63% of the sector’s profits, according to the CBE.

Following the bailout, the central bank’s reserves are at a record high. Local banks anticipate a boost in foreign currency inflows from international investors and improved remittances from Egyptian workers abroad, which fell by 30% in 2023. Increased liquidity should encourage banks to lend more to small and midsize enterprises, fostering local private-sector growth.

“The Egyptian banking sector has strongly benefited from the higher interest rate environment, with net interest margins, profits, and return on equity at all-time highs, especially for privately owned banks,” argues Elena Sanchez, managing director and head of Financials at EFG Hermes Research. “Credit quality has been remarkably resilient against a challenging macroeconomic backdrop in 2022-2023, and banks at large have used strong revenue growth to add to their provisioning buffers.”

El-Husseiny credits the CBE’s adoption of a tighter monetary policy stance with easing inflationary pressures and putting inflation itself on a downward trajectory.

“The implementation of a flexible exchange rate has successfully eliminated foreign exchange shortages,” he adds. Egypt has floated its currency several times, but always quickly reversed the decision when devaluation sped up. Since March, all eyes are on the CBE and its willingness to stay the course.

“I think it’s one of the biggest things for any investors,” Louw argues, “because it doesn’t help being able to put money in if you can’t take money out. So, [the central bank’s] willingness and ability to stick to this program will be crucial to sustain foreign inflows and foreign investment into the country.”

The other upside for investors: a currency drop. Some local assets now appear quite cheap.

“Egypt has become a competitive destination for manufacturing, considering how much the foreign exchange has weakened,” says EFG Hermes’ Abou Basha. “Foreign investors, though, are still waiting for more clarity on policy directions, geopolitical risks, and interest rates.”

Investors have been burned in Egypt in the past, “so there is still a level of cautiousness around it,” Louw notes. “You need to come in with your eyes wide open. Any country with yields close to 30% is not risk-free. But I think you’re in the phase of the investment cycle where I would be pretty comfortable putting money to work in Egypt.”

Only time will tell how sustainable Egypt’s economic recovery proves to be, but local banks are already leveraging tech to explore new growth avenues.

The CBE is expected to issue new digital licenses this year, further solidifying Egypt’s position as a regional fintech leader. Additionally, the country’s banks and other private financial services providers are eyeing regional expansion in the Middle East, Africa, and beyond.

In July, MNT-Halan, one of Egypt’s biggest fintechs and the country’s first unicorn, announced the full acquisition of Tam Finans, Turkey’s leading non-bank lending service for small to midsize enterprises, with a local loan book of $300 million. A few months prior, it stepped into Pakistan, acquiring Advans, a microfinance bank.

Established in 2018, MNT-Halan is now one of the Middle East’s fastest-growing fintechs, providing an array of services that include digital payments, e-commerce tools, and business and consumer lending. It raised $157 million in June alone, after pulling in $400 million in 2023.

Islamic finance is today a $3.9 trillion industry spread over more than 80 countries with the bulk of it concentrated in very few markets. Comparing data from different sources shows that just 10 countries account for almost 95% of the world’s sharia compliant assets. Saudi Arabia and Iran lead the way with 25% to 30% market share each, followed by Malaysia (12%), the UAE (10%), Kuwait and Qatar (5.5%), Türkiye and Bahrain (3.5%), Indonesia and Pakistan (2%).

These countries drive the growth of Islamic finance, set industry standards and foster innovation. Over the past decade, Islamic finance grew at an exponential yearly pace of around 10%. According to the 2023 State of Global Islamic Economy report, total sharia-compliant assets will grow to $5.95 trillion by 2026 although that depends on the economic well-being of these 10 markets.

Islamic finance’s primary sphere of influence is of course the Arab world thanks to its Muslim-majority populations and abundance of petrodollars. The Middle East and North Africa (MENA, which excludes Iran) are home to over 190 Islamic banks.

The share of Islamic banking from total banking assets varies among Arab countries, with Sudan recording the highest share at 100%, followed by Saudi Arabia at 74.9%, Kuwait at 51%, Qatar at 28.6%, Djibouti at 25.0%, the UAE at 22.7%, Jordan at 17.8%, Palestine at 17.4%, Oman at 16.6%, and Bahrain at 16.1%.

The Gulf Cooperation Council (GCC) dominates the world of Islamic finance with over 97% of the top 50 Arab Islamic banks’ assets (see table below).

The region’s 15 largest Islamic banks are all GCC-based and accounted for nearly $770 billion assets in 2022. These banks sometimes branch out abroad—Bahrain’s Bank al Baraka for instance has offices in more than 15 countries. A milestone for the region was the finalization Kuwait Finance House’s acquisition of Bahrain’s Ahli United late 2022. The $8.8 billion created the second largest Islamic bank in the world with over $120 billion combined assets (see table below).

Up until recently, North African countries considered Islamic finance to be an unwelcome interference from Gulf states. Islamic banks and financial products were outlawed or strictly monitored.

Morocco allowed it last. In 2017, the regulator, Bank Al-Maghrib, allowed five Islamic banks to start operating in the kingdom. The country also issued its first Islamic bond or sukuk in 2018. By 2022, “participatory finance” as it is called there was worth $2.7 billion. Sharia-compliant lenders represented only 2% of the local banking market but their assets grew 20% year over year, a much higher growth rate than that of conventional banks.

That same year, Islamic lenders had a 5.1% market share in Tunisia and 2.4% in Algeria where Islamic banks already existed. Governments are currently working on legal frameworks to introduce sukuks and pushing for conventional banks to develop and commercialize sharia-compliant products.

Egypt, North Africa’s biggest market issued its first Islamic bond in 2023. Sharia-compliant finance grew 22% between 2022 and 2023 and represents about 4% of the local banking sector according to the Egyptian Islamic Finance Association.

If MENA represents Islamic finance’s past, the Asia-Pacific region—where the majority of the world’s more than 1 billion Muslims live—may represent its future.

Today, the Asian-Pacific region represents almost 25% of the global Islamic finance market. In Malaysia, sharia-compliant institutions account for close to one-quarter of the financial sector. Kuala Lumpur is one of the main drivers of the global sukuk market and weighs in on international compliance with the Islamic Financial Services Board, one of the world’s two major Islamic finance regulatory bodies.

Other mature Asian Islamic finance markets include Bangladesh, Brunei and Pakistan where sharia-compliant assets make up more than 15% of total bank assets.

Surprisingly, Islamic finance is still in its infancy in Indonesia even though its population is 90% Muslim. In 2023, sharia-compliant lenders accounted for only about 8% market share. In recent years, the authorities began to see the potential of Islamic finance and developed a roadmap to develop the sector with the help of Malaysian expertise that led to the consolidation of three entities to create of Bank Syariah, one of world’s ten biggest Islamic lenders. The country is also a pioneer for green Islamic bonds.

The nature of the African market—huge territories, little financial education, lack of regulatory frameworks—makes it challenging for Islamic banks to establish a presence in most Sub–Saharan countries. If sharia-complaint finance is to develop on the African continent, chances are will be led by banks from Egypt, Sudan and Morocco.

At this stage, Islamic finance in Africa tends to spread through private or sovereign bonds rather than brick-and-mortar banking. African governments see Islamic finance as a tool to raise development funds on international markets and diversify their pool of investors but so far, the results have been limited.

“We expect the top three sukuk issuers in Africa—South Africa, Egypt, and Nigeria—will continue to play a role in Islamic finance. Rated African sovereigns’ sukuk issuance amounts to almost $4.3 billion and has accounted for more than two-thirds of Africa’s total issuance of $6.6 billion since 2014” reports S&P in its 2024 assessment. However, “the complexities of sukuk and changes to sharia standards continue to intimidate African sovereign and slow adoption rates.”

In the aftermath of the 2008 crisis, Islamic finance appeared as a relatively safe alternative to the teetering Western banking system. Sukuks seemed like a good way to tap into new markets, Islamic funds represented opportunities to access large amounts of liquidity and Islamic banking was a way of monetizing local Muslim communities.

London positioned itself to become the hub for sharia-compliant finance in the Western world. Today, the UK boasts five licensed Islamic banks, over 20 conventional banks offering Islamic financial products.

Other European countries where Islamic finance made a remarkable start include:

France—which has the largest Muslim population in Europe—is also a promising market. Authorities (including France’s former minister of finance and IMF director Christine Lagarde) have pushed hard for the development of Islamic finance there, yet banks have largely failed to respond due to fears that being associated with Islam at a time when the country is targeted by terrorist attacks would damage their reputation. French investment banks however offer sharia-compliant products and services to cater to the needs of wealthy foreign clients. 

Russia has also started offering Islamic finance products through fintechs like Payzakat, or traditional banks. The idea is both to cater to its Muslim population and help its banks scale into MENA markets, like Sberbank the leading Russian lender who set up in Abu Dhabi in 2020.

Elsewhere in the world, some US banks have started offering sharia-compliant products but such offerings remain a very small niche. South America is the last continent where Islamic finance is taking root. Mexico is starting to think about it. In December 2017, Trustbank Amanah, the continent’s first Islamic bank, bank opened in Surinam.

In just a few decades, Islamic finance has established itself as a significant player in global finance. Today, with thousands of institutions around the world, this sector is no longer limited to the devout clientele of Muslim countries in the Middle East and Southeast Asia. It has successfully gained market share in Europe, Asia, Africa, and North America, where a diverse clientele is drawn to the Sharia-compliant principles of risk-sharing and social responsibility. As global investors increasingly prioritize sustainability and ethics, Islamic banking’s alignment with these values positions it as a key player in the burgeoning sustainable finance movement.

Islamic banking has also proven resilience in turbulent economic times. By prohibiting speculation and leveraging risk-sharing mechanisms, Islamic banks have demonstrated their ability to withstand crises, sometimes better than the conventional sector, a strength particularly relevant for investors in today’s uncertain economic climate. With a host of new financial innovations and robust regulatory backing, Islamic banking is poised for a bright future.

Islamic finance is a way of doing financial transactions and banking while respecting Islamic law or sharia. Islamic finance hardly existed 30 years ago yet today is a $3.96 trillion industry with over 1,650 specialized institutions located all around the world. Islamic banks are by far the biggest players in the Islamic finance industry and account for $2,7 trillion or 70% of total assets. According to a 2023 State of Global Islamic Economy report, total sharia-compliant assets are expected to grow to $5.95 trillion by 2026.

Islamic finance only represents about 1% of global financial assets but with a compound annual growth rate of 9%, it is expanding quicker than conventional finance. In some geographies like the Gulf Cooperation Council (GCC) or Sub-Saharan Africa, Islamic banks now compete directly with Western banks to attract Muslim clients.

So what is behind the success of Islamic finance? What makes Islamic finance special? Why is it growing rapidly?

All Islamic finance investments, acquisitions, and transactions must reflect Islamic values. Dealing with anything illicit (haram) like alcohol production, pork breeding, arms manufacturing, or gambling is strictly forbidden. It is interesting to note that similar initiatives exist in other faiths—the STOXX Index for example only selects companies that respect Christian values.

This ethically-driven approach to business partly explains the success of Islamic banks at a time when many customers lack trust in the financial system. Moreover, sharia-compliant entities have proven themselves in times of crisis.

Because Islamic law holds that making money from money is wrong, sharia-compliant institutions tend to refrain from engaging in speculation. They traditionally avoid derivative instruments such as futures or options and prefer to have assets grounded in the real economy.

This substantially protected Islamic banks from the 2008 financial crisis. Unlike their conventional counterparts, sharia-compliant banks were not involved with toxic assets and resisted the shock better.

“Adherence to Shariah principles—which precluded Islamic banks from financing or investing in the kind of instruments that have adversely affected their conventional competitors—helped contain the impact of the crisis on Islamic banks”concluded a 2010 IMF report.

This is a major reason why Islamic finance now has a serious, stable and trustworthy image around the world.

Many of the products offered by Islamic financial institutions are comparable to Western or conventional finance even though interest and speculation are forbidden. Banks are by far the biggest players in Islamic finance—some of them are exclusively Islamic while others offer sharia-compliant products but remain mostly conventional.

Aside from the absence of interest rates, the key concept of Islamic finance is risk sharing between parties in all operations. Here are some of the key sharia-compliant products offered by banks—they have Arabic names but in most cases we can find an equivalent in conventional Western banking.

Mudarabah or profit share: An investment in which the bank provides 100% of the capital intended for the creation of a business. The bank owns the commercial entity and the customer provides management and labor. They then share the profits according to a pre-established ratio that is usually close to 50/50. If the business fails, the bank bears all the financial losses unless it is proven that it was the customer’s fault.

Musharakah or joint venture: An investment involving two or more partners in which each partner brings in capital and management in exchange for a proportional share of the profits.

Takaful or insurance: Sharia-compliant insurance companies offer products comparable to conventional insurance companies and functions like a mutual fund. Instead of paying premiums, participants pool money together and agree to redistribute it to members in need according to pre-established contracts. The common pool of money is run by a fund manager.

The fund can be run in different ways when it comes to the surplus distribution and the fund manager’s compensation.

There are three big models:

In some cases, the fund manager creates a waqf, or a charity fund.

Sukuk or bonds: Sharia-compliant bonds began to be issued in the 2000s and standardized by the AAOIF—a Bahrain-based institution that promotes sharia-compliant regulation since 2003. Today, over 20 countries use this instrument. Malaysia is the biggest issuer, followed by Saudi Arabia and issuers outside the Muslim world include the UK, Hong Kong, and Luxembourg.

Sukuk issuance took off in 2006 when issuance hit $20 billion. Apart from a drop in 2015–2016 volumes then grew steadily to reach an all-time high of $162 billion in 2019, up 25% from 2018. This record number was backed by strong appetite from Malaysia, Indonesia, Gulf Cooperation Council (GCC) countries and Turkey.

That was before COVID 19. According to credit ratings agency Standard & Poor (S&P), the volume of issuance should drop around $100 billion.

“The market was, in fact, poised for good performance in 2020 but the pandemic and lower oil prices changed the outlook. Amid tougher conditions, we also don’t see core Islamic finance countries using sukuk as a primary source of funding despite their higher financing needs,” says S&P in its 2020 report on Islamic Finance.

Other industry experts beg to differ. Refinitiv research says sukuk issuances will continue to grow and could reach $174 billion in 2020 backed by government funding requirements.

Like conventional bonds, sukuks are very appealing to governments for raising money to spend on development projects. Their main challenge remains standardisation; buyers tend to find it more difficult to assess risk than with regular bonds.

Islamic finance also exists in the form of investment funds.

For hundreds of years, there was no need for Islamic finance because there was simply no financial system to “Islamise.” Up until the second half of the 19th century, the vast majority of the Muslim population around the world was unbanked and the prohibition of interest was applied on transactions by tradition rather than by law or regulatory bodies.

During the colonial era, Western banks and financial institutions penetrated Muslim countries and imposed interest-based methods on the Islamic world. In the 1940s and 1950s, independence movements pushed for the revival of Islamic culture and religious scholars in countries such as India, Pakistan and Egypt started to condemn the use of interest by banks. They proposed to prohibit interest and replace it with Islamic risk-sharing. Localized Islamic finance experiments took place in the 1960s in Egypt and Malaysia.

In many ways, Islamic finance was born as a rebellion against colonialism and for self-determination. The idea was to provide an ethical alternative to the Western-dominated international financial system based on the Quran.

In the 1970s, Persian Gulf countries—which were both suddenly incredibly rich with petro-dollars and extremely conservative in religious belief—took Islamic finance beyond local experiments and created the Saudi Arabia-based Islamic Development Bank in 1975 followed by the Dubai Islamic Bank in 1979. Because the establishment of the first sharia-compliant institutions coincided with the rapid economic development of their home countries, a large share of Islamic investments went into the construction and real estate sectors.

Islamic finance expanded quickly, first in the Arab world and East Asian countries with significant Muslim populations before reaching the West and especially the UK in the early 2000s. In parallel to that expansion, two regulating bodies emerged—the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) in Algeria (now relocated to Bahrain) and the Islamic Financial Services Board (IFSB) in Malaysia.

Today, there are over 1,650 Islamic financial institutions spread all over the world and total sharia-compliant assets represent $3.9 trillion. Although Islamic finance is less than 1% of the global financial market, it is one of the fastest-growing segments, attracting at times non-Muslim customers. While consolidating their existing markets, sharia-compliant entities have started to branch out into new territories, notably Sub-Saharan Africa and Europe. In a world that increasingly worries about environmental, social and governance issues, some depositors and investors see Islamic finance as an ethical way of dealing with their money.

Islamic finance offers products and services that comply with Islamic law (sharia) but who decides what is and is not sharia-compliant and what mechanisms exist to enforce those judgments?

Each Islamic finance institution has a sharia supervisory board (SSB). The board is composed of at least three jurists. They are paid by the bank but act as independent consultants. Their role is both consultative and regulatory: They answer the staff’s questions, advise on charity contributions (zakat), verify operations and certify products.

SSBs decide what is allowed (halal) or forbidden (haram) based on the two main sources of Islamic law: the Quran and the Sunnah—or what the Prophet Muhammad reportedly said and did during his lifetime. Board decisions are taken by majority vote and binding on the bank.

SSB members are typically religious scholars who specialize in Islamic jurisprudence. In Western countries like the UK, they can also be non-Muslims experts who have studied such matters extensively.

Over the past 10 years, Islamic finance has rapidly expanded across the world and finding qualified people to sit on SSBs has become challenging. In the world of Islamic finance, reputation is key and sharia non-compliance can be fatal to a bank.

At there international level, there are two supervisory bodies for Islamic finance: the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the Malaysian Islamic Financial Services Board (IFSB).

These bodies collaborate with institutions such as the IMF or the World Bank to promote sharia compliance globally. The AAOIFI sets basic standards for the Islamic finance industry while the IFSB issues recommendations based on risk assessments.

In Bahrain and the United Arab Emirates, AAOIFI standards are mandatory but in most countries their standards and recommendations are not binding. If a bank doesn’t comply, there are no sanctions. It is up to each country’s government to enforce certain rules through their central banks who impose those rules on sharia boards.

In all countries—except Sudan and Iran—Islamic finance exists alongside conventional banking. For Islamic banks, this means navigating a dual regulatory framework: the country’s laws and regulations as well as sharia compliance.

Already one of the wealthiest regions in the world, the Gulf Cooperation Council states are solidifying their status as a hub for global fortunes. According to Boston Consulting Group, the region’s financial wealth is expected to grow by 4.7% annually by 2027, reaching $3.5 trillion, up from $2.8 trillion in 2022.

“While global growth overall is moderate, the GCC is one of the fastest-growing regions and stands at the forefront of global wealth accumulation,” says Abdulla Al-Sada, senior executive vice president of QNB Group Asset and Wealth Management, a unit of Qatar-based QNB Group, the MENA region’s biggest financial institution by assets and the first lender to have established private banking in the emirate. “We are working on an ongoing basis to further enhance and uplift our holistic wealth management offering for our sophisticated and demanding clientele.”

For private wealth managers, the region offers attractive opportunities. The GCC already hosts hundreds of private banks, asset management firms, and family offices, including global leaders like Edmond de Rothschild, Goldman Sachs, and BlackRock. Each month, new firms enter the market.

In December, Farro Capital established a presence in Dubai’s International Financial Center (DIFC). For Rajiv Garg, senior executive officer of the Singapore-based multi-family office, expanding into the Middle East was a “no-brainer,” as “the region’s family office market is projected to exceed $1 trillion by 2026” and offers “a perfect blend of traditional wealth as well as newly minted billionaires and unicorn founders.”

In the past, local entrepreneurs and families typically sent their money to private banks in Switzerland or Luxembourg for safekeeping. According to a recent report by Strategy&, the global strategy consulting arm of PwC, over 70% of the region’s private wealth is currently held in offshore accounts. But today, GCC clients have a new priority: passing wealth to the next generation.

“In recent years, we’ve see a paradigm shift with the increasing importance of generational wealth transfer, tech entrepreneurs and family offices, especially in the United Arab Emirates and Saudi Arabia,” says Antoine Chemali, CEO of BNP Paribas Wealth Management Middle East, who has been working with the region’s families since the 1970s. 

By 2030, an estimated $1 trillion of assets is expected to change hands in the Middle East. Local legislation has evolved to facilitate this process. For many GCC families, which have amassed vast fortunes primarily from oil and gas over less than a century, this will be the first major generational wealth transfer. For asset managers, it is a chance to offer custom-made services.

“We see ourselves as an extension of these families, where we act as their de facto family office with full-service offerings,” says Garg. The goal is to redefine the way families manage their wealth, enter their trusted inner circle, and “guide them in preserving and compounding their assets for generations to come.”

Industry experts anticipate that the new generation will bring a different set of goals to the task than their forebears.

“They will expect innovative financial solutions, digital instruments, sustainable wealth management solutions, and diversified investment products across asset classes globally,” says Sana Al-Hadlaq, senior executive director of Wealth Management at Kuwait’s Kamco Invest, one of the largest asset managers in the region with over $16 billion assets under management. “They expect their wealth managers and institutions to provide them with global reach and access across different markets and asset classes. Investments should comprise all asset classes, including alternative investments with superior returns along the dimensions of private equity, venture capital, and real estate,” says QNB’s Al-Sada.

While reaching across the planet, these younger clients will also be keeping much more money at home.

“International investment remains attractive, but there is a growing trend of these clients retaining a more significant portion of their assets in the region,” says Michel Longhini, group head of Global Private Banking at First Abu Dhabi Bank, the UAE’s largest bank. “This trend has been one of the key drivers of growth and diversification of private wealth management in the UAE and the GCC countries as governments have introduced more robust regulatory frameworks and initiatives to encourage the establishment of local investment companies.”

PwC forecasts the regional wealth management industry growing faster than the global average, reaching $500 billion in onshore assets by 2026, up from $400 billion in 2022, creating significant opportunities for local players to step up their game.

Besides fortunate heirs, the GCC has also become a destination for the globalized wealthy. According to the Henley Private Wealth Migration Report, the UAE has seen the largest influx of millionaires in the world since the pandemic, drawing 4,000 to 5,000 new residents annually from countries like India, the UK, Pakistan, Nigeria, and China. These migrants seek a safe haven to park their fortunes but also new business opportunities and a luxurious lifestyle, according to Vipul Kapur, head of Private Banking at Mashreq, one of the UAE’s largest private banks.

To attract new high-profile residents, GCC governments have adapted their conservative legal systems, introducing reforms to labor laws, residency programs, golden visas, and new ownership rules for property and businesses.

“The UAE and other GCC countries have implemented regulatory reforms to build a more robust financial environment, draw investment, and unlock their dynamic economies,” says Longhini. In 2023, FAB Private banking reported 14% year-on-year revenue growth and a 22% increase in assets under management, thanks mainly to new client acquisition.

New money is expected to keep flowing into the GCC this year. The UAE’s removal earlier this year from the Financial Action Task Force’s “grey list” of countries working to address deficiencies in their regimes for countering money-laundering and terrorist financing promises to further boost investor confidence. In Saudi Arabia, a policy requiring foreign companies to establish regional headquarters in the kingdom to do business with the government is likely to attract new fortunes eager to tap into the MENA region’s largest market.

Private wealth and asset management has traditionally been dominated by international financial institutions, but local ones are rising to the challenge, especially in regions where the new wealthy are proliferating. For some, this means forming partnerships.

“We have built strategic alliances with international partners,” says Al-Hadlaq. “We complement the value offered by Western financial institutions by providing them access to the best opportunities and services here.”

Other local managers prefer to compete for the best products and services.

“We need to differentiate through specialized services, customer experience, and innovative solutions,” says Mashreq’s Vipul Kapur. “This means adapting to new technologies, managing security risks and meeting customer expectations for seamless digital experiences.” 

Competition fierce in digital products and fintech, where AI is expected to open new horizons.

“This will challenge us to rethink the way we do business and operate,” says QNB’s Al-Sada. “These technologies will transform the entire asset and wealth management industry from the front to the back office, with an emphasis on personalization and increases in productivity.”

With both local fortunes and international client bases growing, the outlook for GCC asset managers that can seize the opportunity is positive. New technologies may even help them catch up with global industry leaders more quickly than anticipated. As regulatory environments continue to evolve, the region is looking forward to a surge in financial innovation, including blockchain technologies and green finance initiatives, further solidifying its role in the global financial ecosystem.

As they grow in sophistication, GCC asset managers are also increasingly looking to take their homegrown expertise beyond their borders and expand into new markets across Africa and Asia, where they aim to tap into emerging nodes of high-net-worth individuals.