Growth and Sustainability of Islamic Finance Practice in the Financial System of Tanzania: Challenges and Prospects

Tanzania has witnessed an abrupt growth in Islamic finance industry over the last decade. A quick survey has revealed attractiveness of the industry to conventional bankers, financial agencies and among Muslims particularly between 2008 and 2013. Islamic financial institutions have grown in terms of the increasing number of Islamic products and assets particularly in the year 2012 during which, three banks and three Islamic Microfinance institutions (SACCOS) were opened, and seemed to give a promising future if sustained. However, this remarkable growth and sustainability of improved financial services is jeopardized by lack of national legal framework that guides financial operations within the system of Central Bank of Tanzania, and dysfunction of traditional Islamic funding system such as ‘Takaful’ and ‘Zakat’. This situation predicts a plight future for the industry in the country, and if it is not addressed properly will add to the list of the widespread poverty and deteriorating people's socio-economic status.