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Economic growth

Africa Finance Corporation, UNIDO, and Partners Unite in Historic Alliance to Leverage Islamic Finance for Economic Transformation

Strategic Insights

— 2 min read

Africa Finance Corporation, the United Nations Industrial Development Organization, and partners have formalized a new strategic alliance aimed at leveraging Islamic and Arab finance to drive economic transformation in Africa, the Arab Region, and Beyond. This historic partnership, known as the Islamic and Arab Finance for Economic Transformation in Africa, the Arab Region and Beyond (IFETAA) Programme, seeks to address one of the most significant barriers to Small and Medium-Sized Enterprises (SME) growth and economic transformation: access to finance.

Key Takeaways:

  • The IFETAA Programme represents a new alliance that will drive capital and capacity towards MSME development, resilience, and growth across low- and lower middle-income countries.
  • The programme aims to empower MSMEs to become bankable, resilient, and key drivers of inclusive economic growth by integrating Islamic finance with proven entrepreneurship and business counseling interventions.
  • Islamic finance, with over US$4 trillion in assets, offers a largely untapped opportunity to address the gap in access to finance for SMEs, particularly in Africa, the Middle East, and South Asia.
  • Only one in five African firms has access to credit, and those that do often face prohibitively high interest rates averaging 25 percent, compared to just 5 percent in Europe.
  • The programme will unlock urgently needed capital for Africa's economic transformation and will mobilize funding at scale through AFC's unique expertise in both conventional and Islamic finance.
  • AAOIFI has pledged to mobilize 20 percent of Islamic Financial Institutions' loans and advancements towards MSME development, while UAB has reaffirmed its commitment to channel US$1 trillion from its member banks towards the Sustainable Development Goals (SDGs).
  • IFETAA will facilitate access to finance by developing a pipeline of bankable MSME projects, establish financial and non-financial de-risking mechanisms, and support host governments in strengthening regulatory frameworks to expand Islamic and conventional bank lending.

Statistics:

  • Over US$4 trillion in assets in Islamic finance.
  • Only one in five African firms has access to credit.
  • Interest rates averaging 25 percent for SMEs in Africa, compared to 5 percent in Europe.
  • US$1 trillion pledged by UAB from its member banks towards the Sustainable Development Goals (SDGs).
  • US$500,000 committed by UNIDO to support the preparation of the IFETAA programme and its initial implementation.
  • US$400 million raised by AFC through a Shariah-compliant Commodity Murabaha facility.
  • US$230 million Sukuk issued by AFC, the first-ever by an African supranational institution.

Sources:

  • M2 PressWIRE, June 18, 2025: "Africa Finance Corporation (AFC), United Nations Industrial Development Organization (UNIDO) and partners enter new alliance leveraging Islamic and Arab finance for economic transformation".
  • Africa Finance Corporation (AFC), (www.AfricaFC.org).
  • United Nations Industrial Development Organization (UNIDO), (www.unido.org).
  • Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), (www.aaoifi.com).
  • Union of Arab Banks (UAB), (www.uabweb.org).

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