Dubai Islamic Bank (DIB) has signalled intention to enter the budding East African Islamic market. DIB chairman, Mohammed Ibrahim Al Shaibani, said that the lender would expand and consolidate its reach in East Africa after solidifying its Kenya base. The Central Bank of Kenya (CBK) in May opened the door for Dubai Islamic Bank to enter the local market after more than a year of waiting. DIB intends to exclusively offer Shariah-compliant banking services in the country. Kenya has recently unveiled a package of initiatives aimed at developing a policy framework for Islamic finance in the country. Authorities intend to make Kenya a hub for Islamic finance in Africa with ongoing reforms expected to drive the growth of Islamic-finance operations.
The International Monetary Fund (IMF) has warned that the rapid growth of Islamic finance in Kenya is happening without adequate protection of depositors. Despite the fact that the Shariah banks are already offering loan products, Kenya is yet to refine its prudential regulations to cater for Islamic banking. Kenya is also yet to come up with a Shariah-compliant deposit insurance scheme and is continuing to manage deposit insurance premiums in a single pool for all banks. This situation could complicate compensation of depositors if a bank offering conventional and Islamic products collapses. According to the IMF, Kenya should seek to bring clarity to the grey areas in Islamic finance as it drafts amendments to the banking law as promised in the 2017/18 budget.
Dubai Islamic Bank’s (DIB) formal entry into the Kenyan market is expected to shake up locally-owned Islamic lenders that have faced little competition for a decade. The Central Bank of Kenya (CBK) has now opened the door for the bank after more than a year of waiting. Kenya has until now had only two fully-fledged Islamic banks, while five other conventional lenders have been offering Shariah-compliant services and products through "Islamic Windows". DIB makes its foray into Kenya at a time when authorities are keen to make Kenya a hub for Islamic finance in Africa with ongoing reforms expected to drive the growth of Islamic-finance operations. The Kenyan government has recently unveiled a package of initiatives to develop a policy framework for Islamic finance in the country.
A #Kenyan college yesterday signed a three-year memorandum of Understanding (MoU) with Malaysian training university to develop curriculum on Islamic Finance. Coast International College (CIC) also signed a letter of collaboration with the Inceif, the global University for Islamic Finance owned by the Central Bank of Malaysia. The MoU was signed by college principal Loise Gichuki, Inceif president and chief executive Daud Vicary Abdullah. The programme will offer Diploma in Islamic finance. The Malaysia University will provide curriculum, course materials and lectures related to Islamic jurisprudence, Islamic Law of contract, financial accounting and fundamentals of Islamic Banking.
In #Kenya the Sharia-compliant lender First Community Bank (FCB) has laid off a third of its workforce as effects of the recent capping of interest rates continue to shake the banking industry. The lender’s staff costs stood at Sh241.4 million as at June 2016 which rose to Sh365.2 million at the end of September, prompting action by the bank’s management. The bank, which received a regulatory approval in May 2007 to start Sharia-compliant banking, last week reported a 16.2% jump in quarter-three net profit to Sh74.4 million. FCB is one of four banks that recently announced staff cuts as a reaction to the biting interest regulations on loans and deposits. The other three banks are Sidian Bank, Family Bank and Ecobank.
The existence of interest, variation of charges on the basis of amounts of cash withdrawals using the cards and the fact that the default rates with quite punitive charges are some of the features that makes the conventional credit cards non-compliant from the Islamic perspective.
In order to comply with the Shariah principles and guidelines, Islamic banking has embraced the needs of customers by repackaging and reimagining existing conventional banking products or engineering innovative products. These help regulating human interactions and transactions to promote transparency, fairness, justice and accountability to each other. The provisions of interest, the financing of business ventures involving alcohol, arms trade and undertaking excessive risks as well as ambiguous contractual obligations that end up benefiting some parties in transactions at the expense of others, form part of the Shariah’s prohibitions. Credit cards are therefore considered offensive to the Shariah standards
In #Kenya a National Bank customer has asked the High Court to shut down the lender’s Islamic banking wing while demanding Sh3.7 billion compensation over a loan repayment dispute. Tulla Reserve Supplies claims National Bank illegally changed his facility from a fixed term loan to a revolving musharaka loan, effectively raising the interest rate from 18.5% to an Islamic profit-sharing equivalent of 19.5%. Director Diba Hussein Dado holds that the alleged switch to a revolving musharaka loan left his firm owing Sh922 million to National Bank. His firm supplied grains to Kenya Prisons, Unga Limited and World Food Programme (WFP). But National Bank insists that the contracts it signed with Tulla were for revolving facilities and Mr Diba has opted to feign ignorance in the hope of building a case against National Bank.
Genghis Capital plans to launch Shariah-compliant unit trust in February aiming to raise stakes in the nascent market mainly tailored for Muslim investors. The unit trust is named Iman Fund and is part of a money markets, equity, diversified and bond unit trusts which the company intend to launch in the very near future. According to the Genghis Capital unit trust consultant, there are many Kenyan investors willing to invest in ventures considered socially responsible. However, so far their options have been limited because religious beliefs forbid most of what is on offer.