Challenges facing Islamic finance in Tanzania

Islamic finance has recently been a focal subject in many banking industries all over the world. Though, the presence of the Islamic finance in the banking industry, especially in Tanzania, is not as strong as the conventional banking. The research aims at identify the challenges facing Islamic finance in Tanzania so as to remain viable, meet the growing competition and develop and prosper. The methodology used for this research is mainly analytical in nature, where the existing literature was thoroughly surveyed. A comprehensive list of issues relevant for the future of Islamic finance was prepared. A questionnaire based on these issues was sent to 100 Muslims and non Muslims, out of those, 75 filled and returned the questionnaires. Their perception on various problems facing Islamic banking is summarized in Annexure-l. The study discussed the perceived major challenges and recommends the way to overcome them so that Islamic bank/windows can prosper and grow. The addressed recommendations mainly attempt to improve the regularity and supervisory framework and better public awareness. Also, highlight the need for modification of accounting standards, legal system and supporting institutions for better operation of Islamic banks. In addition, the impact of Islamic banking in financial engineering, short-term placement of funds and portfolio diversification was also addressed. Overall a perspective plan is recommended in order to strengthen the Islamic banking market in Tanzania.