As many of our readers know, the Muslim population in Brazil is small, possibly less than 1%. This is a possible reason why Brazil has never paid much attention to Islamic finance.

On the other hand, Brazil is a country with a large population (approximately 210 million inhabitants) and, consequently, with a big market for goods and services in general. Although the Brazilian percentage of participation in world trade is not high, Brazil is a country with relevant volumes of imports and exports.

One main export item for Brazil refers to agribusiness products. In the particular case of poultry, Brazil has been selling Halal poultry for decades to the Middle East and North Africa region.

In view of the aforementioned aspects, Brazil should start paying more attention to Islamic finance as an alternative for economic development just like what other countries with smaller Muslim populations have already done.

The banking and insurance industries are well regulated and the basic legislation governing these industries has existed for decades. In order to allow the introduction of Islamic finance products in Brazil, the current regulations need to be amended or altered. Financial institutions in Brazil need to provide detailed information on their activities and they cannot acquire and/or sell goods in general as part of its corporate purpose.

One good example regarding the regulated activities of banks in Brazil refers to the possible use of Murabahah in the case of import of products.

Brazilian banks are not allowed to buy certain goods abroad such as equipment and sell it to its client, the final purchaser, with an agreed profit. The banking law and regulations would have to be modified and Brazil should include Islamic finance in the political and economic agenda.

Another relevant aspect is that foreign banks still have restrictions in carrying out activities in Brazil through branches or subsidiaries. This would also lead to much debate in the country.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.