The existence of Gulf Africa Bank, Dubai Bank and First Community Bank as fully fledged Islamic Banks has cemented Kenya’s position as a hub for Islamic banking in East and Central Africa.
The position is further cemented by the existence of Islamic products in conventional banks and Saccos.
Abdi Hussein, Gulf Bank Garissa Branch Deputy Manager said Kenya was the first country in East and Central African region to introduce Islamic banking.
He noted that though Islamic banking represents only 2% of Kenya’s total banking assets, Kenyan regulators are working towards developing financial markets that offer Islamic products and services so as to provide an inclusive financial sector focus.
He revealed that the Banking Act had to be enacted to include a murubaha, an Islamic banking product where the seller (a bank) and a buyer (client) agree on the mark–up for items to be sold or purchase, a person’s faith notwithstanding.
Hussein added: ‘The move offers riba (interest) free banking in line with sharia rules. It neither gives nor takes loans on interest but operates as a trading company involving both buyer and seller in agreement,”
He clarified that since under sharia law, money lent to someone or deposited in a bank isn’t allowed to generate more money, banks make their money by sharing the risk of their investments with investors, operating on a profit loss basis importantly.
The deputy manager pointed out that some of the challenges facing Islamic banking in the Kenyan market are regulatory challenges, divergent opinion on sharia compliance, liquidity management, employee qualification and training, customer awareness and limitation of Islamic products amongst other issues.
By Amoto Ndiewo
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