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Friday, 2 November 2007

Kenya: Islamic Bank Sets Foot With New Branches

Kenya's first Islamic lender-First Community Bank - is set to roll out branches across the country following the appointment of veteran banker Nathif Adam as the chief executive officer this week.
With a Sh1 billion capitalisation - four times the statutory base -the bank will hit the ground running in anticipation of intense competition from other banks that have unveiled products targeting Muslims. "It was in line with our business strategy. With this kind of money, we are leaving nothing to chance," Mr Adam told Business Daily.
The bank plans to open branches in the Coast and North Eastern provinces which have largely Muslim populations and in city estates such as Eastleigh where Muslims are the majority.
"Our plan is to have as many branches as possible in all the Muslim-dominated regions of Kenya, including North Eastern Province and as many branches as possible in Coast Province," says Mr Adam, adding that the new bank intends to open a branch in Garissa by next February.
The move is seen as a major step in opening up the regions to the financial sector which comprise a substantial proportion of the unbanked rural population across the country.
The initial roll out targets a branch in Eastleigh -Kenya's "Little Mogadishu" - another in Mombasa and a third at Prudential House within Nairobi's Central Business District. The bank has already hired 55 members of staff across all ranks.
Prior to his appointment, Mr Adam, 58, was the Senior Vice-President and Head of Investments at Sharjah Islamic Bank in the United Arab Emirates (UAE). A career Islamic banker, he insists that he was the pioneer of Islamic banking in Kenya.
"It is not true that Islamic Banking came into vogue in 2005 . I had already indicated my desire to start an Islamic bank to the CBK way back in 1984," he said. Apart from FCB, the Gulf African Bank is the other bank in Kenya with a licence to operate as a fully Islamic bank.
The La Riba account offered by Barclays Bank was the first ever Sharia compliant account in Kenya. The account was set up in December, 2005, and is reported to have attracted nearly Sh560million from traders over the past year.
Mr Adam, however, says there are challenges to be overcome if the new bank is to make an impact in the country. Chief among them is association of Islamic banking with terrorism.
"We have to be realistic. Getting rid of the notion that Islamic banks are conduits for financing terrorism will be one of my biggest challenges," he says. The other is to open up the bank to all Kenyans.
"As a matter of priority FCB will offer shares to the public through an IPO at the Nairobi Stock Exchange," Mr Adam said. Under Kenyan laws, a company has to be in existence for at least five years before it can be listed unless if it is floated at another stock exchange.
Currently, FCB's main shareholders include Sharjah Islamic Bank of the UAE, Al- Madina investment & Finance and Zummoroda Investment company (both of Kuwait) and a number of Kenyans (30 per cent).
Although the bank will be open to people outside the Muslim faith, its main target will be the Somali community who are known as astute international traders. "If we get them and more, we will be a force to reckon with in Kenya's banking industry," Mr Adam said.
The Somali community in Kenya is estimated at 800,000 and has a savings base in the region of Sh800 million. Kenya Commercial Bank (KCB), K-rep Bank and Dubai Bank, also offer shari'a compliant products targeting the country's 9 million Muslims. Other banks such as Imperial Bank are also in the process of introducing similar products before the end of the year.
The emergence of shari'a complaint bank products was made possible through amendments made to section 53 of the Banking Act last year, removing prohibitions on trading in and holding of fixed assets.

The amendment was intended to promote the introduction of innovative products in the banking sector, including Islamic Banking products that may require an institution to hold a fixed asset.
Since the amendment, several banks have opened up windows offering interest free-based accounts to accommodate religious sensitivities of some Muslims.
Globally, HSBC and UBS have created separate brands for Muslims whileMaybank in Malaysia and Samba Financial in Saudi Arabia have opened special branches that sell only Islamic banking products. - (AA, 1 Nov 07)

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