Risk Management in

Islamic Financial Instruments

4.3.3 Sub-Sahara Africa Region

Only the Islamic banks from Sudan and Gambia are listed in the BankScope database. Based on

data availability, 8 Islamic banks from these two countries are selected for this analysis. Sudan

represents a unique financial system, whereby only Shariah compliant financial services are

provided. Due to lack of sufficient data, Islamic banks from Gambia are not included in the

analysis.

The sample includes 8 Islamic banks from Sudan, with an average asset size of 469.082 million

USD and average Total Deposit volume of 224.137 million USD. Islamic banks in the region

have, on average, 6.38 branches and 103 employees.

4.3.3.1 Risk Matrices

Asset Quality Ratios

For the Sub-Saharan region, especially for Sudan, only the Islamic banks are considered, as the

legal system in Sudan now sustains only Islamic, Shariah compliant banking. Islamic banks in

Sudan exhibit an average Loan Loss Res/Gross Loans ratio of 3.02% and a Loan Loss Res /

Impaired Loans ratio of 4.91%, which is generally lower than many other peer Islamic banks in

other geographic areas. (See Chart 4.9)

Capital Adequacy ratios

In general, the Islamic banks in Sudan maintain a significant cushion to cover their risk

exposure and possibly capital adequacy problem. Most of the capital ratios are higher than

other peer Islamic banks. Higher Equity / Net Loans reflect a higher cushion to absorb losses

on the loan book. (See Chart 4.10)

Operational Efficiency ratios

In general, higher operating ratios represent lower cost of funds, higher efficiency and higher

yields on equity and assets. Although Islamic banks in Sudan do not exhibit high Net Interest

Margins (2.57%), they have healthy ROAEs and provide higher dividend payouts (20.43%),

compared with their peers in other regions. (See Chart 4.11)

Liquidity Ratios

Islamic banks in Sudan keep a significant portion of their portfolio invested in liquid assets.

The high ratio of Liquid Assets / Tot Dep & Bor reflects higher liquidity. (Refer to Chart 4.12)