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Thursday, 31 May 2007

First Islamic bank in Kenya gets ministry approval

The Standard, 31 May 2007

The first commercial bank operating entirely under Islamic Sharia principles has been licensed.Finance minister, Mr Amos Kimunya, has granted approval to First Community Bank Limited to conduct banking business according to Sharia, which prohibits the lending of money at interest.According to its lawyers, the bank is a joint venture between Kenyan and Kuwaiti nationals and has a paid-up share capital of Sh1 billion."Our client thanks the Central Bank of Kenya and the Ministry of Finance in facilitating the licensing process," Ahmednazir, Abdikadir & Company Advocates said in a statement. They said the board of directors of the Bank would soon issue a more comprehensive briefing on the bank’s plans.

Barclays Bank of Kenya and Kenya Commercial Bank have both introduced Sharia-compliant banking products in the last year but with large numbers of Muslims still unbanked, the market niche is still considered untapped.Islamic banking as an industry has seen dramatic growth in acceptability globally. Its main distinction is that it offers fixed-profit lending, which shields borrowers in times of rising interest rates.In addition, in adverse circumstances, where conventional banks levy penalties and penal interest on default by borrowers, Islamic banks work in partnership with borrowers to realise payment for loans.

Also, they add, depositors in Islamic banks have a potential upside to returns on their deposits in case the underlying assets perform well because the banks share profits with depositors."Islamic banks have, in most countries, maintained a better asset quality than conventional banks while the process of risk assessment is the same as that in conventional banks," they conclude.Meanwhile, Fina Bank will spend Sh20 million in a modernisation programme. Group Chief Executive Officer Mr Frank Griffiths the money will be used to upgrade existing branches."We are giving some of our branches a new design so that customers can get the same kind of service wherever they go," he explained. Griffiths added the bank will open a new branch in Nakuru in June.He said plans are also underway to open new branches in Tanzania and Uganda. Griffiths was speaking on Tuesday night during a function to open a new branch at Apic Centre in Westlands. The bank has closed its Ukay branch.

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