Kenya: Gulf African, Country's First Islamic Bank to Open in April
The East African (Nairobi)
March 6, 2007
Posted to the web March 6, 2007
A consortium of investors, including Bank Muscat International (BMI) and Istithmar, a Dubai government investment agency, will open Kenya's first fully Sharia-compliant bank in April this year.
Around 26 per cent of Kenya's population is Muslim. Islam decrees that its adherents neither pay nor receive interest
The Sharia-compliant financial institution to be known as Gulf African Bank (GAB) will be incorporated in Kenya, with headquarters in Nairobi. It will become the country's 43rd commercial bank.
According to BMI chairman Abdul-Malik al-Khalili, the bank will start with $25 million in capital and could expand to other African countries where Islamic finance is still underdeveloped. GAB is expected to recruit 150 employees in its first year of operations and increase that number to 250 by 2010.
At the commencement stage, more than 90 per cent of the staff will be recruited from Kenya.
The International Finance Corporation (IFC), a World Bank subsidiary is also a shareholder with 10 per cent equity investment worth $2.5 million. Istithmar will hold 30 per cent and PTA Bank 5 per cent. The bank's key objectives include matching investment opportunities between the Gulf states and Africa.
"Africa is an attractive emerging market for the growth of Islamic finance. There is a lot of liquidity in the Gulf and we are making a bridge between the two," Mr Khalili said.
The proposed bank will contribute to the development of Kenya and improve its economy in several areas. It will support industry and trade via several specialised products.
The bank will provide customers with Islamic banking facilities with competitive pricing as an alternative to conventional banking. It will provide banking services to a section of the population that has previously had limited participation in the banking sector.
The bank will aim at developing a competent and skilled workforce through comprehensive training programmes facilitated by BMI.
IFC's participation in the first fully Shariah-compliant bank in Kenya adds impetus to the development of the Islamic banking market, which other parties may hesitate to invest in because of its nascent stage of development.
According to IFC's official website, its main objective for Africa is to help every country achieve as many development projects as possible by 2015.
Toward this end, certain areas of focus have been identified in the Africa Action Plan, including continuing to support the development of an African private sector through the establishment of a well functioning financial system. IFC's participation in the project will boost the confidence of BMI and other international shareholders.
In September last year, Kuwait's Al Madina for Finance and Investment had said it would in partnership with other investors to set up an Islamic bank in Nairobi, describing Kenya as the gateway to East Africa and Central Africa.
According to Islamic experts, Islam does not allow Muslims to pay or receive interest. Most Muslims in Kenya have had to compromise their religion because banks in the country are all interest accruing when they give loans or take deposits.
Both the Muslim and Western world now recognise the need for products that cater for those who subscribe to the Islamic faith. The international Islamic banking market is growing, which means a response from banks makes good business sense.
Countries such as Malaysia and Saudi Arabia have for many years had banks that only offer Islamic products.
However, the emergence of conventional banks offering Shariah-compliant products, in addition to their usual offerings, is a new development.
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