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Saturday, 11 July 2009

Central Bank of Kenya (CBK) urged to set policies for Islamic banks

The Central Bank of Kenya should set up a Central Sharia Supervisory Authority to oversee Islamic banking in Kenya.

According to Mr Ali Mohamed a Sharia auditor from Qatar, the authority should have the duty of setting up policies on Islamic banking in Kenya.

Speaking to journalists in Nairobi on Friday, the auditor warned that the current situation of allowing individual banks to set up their Sharia policies puts customers at risk and cause confusion in the Islamic banking sector.

“In this case, the roles of individual Sharia’a boards will be to monitor the financial institutions Sharia compliance. This will avoid issues of conflicting fatwa and Sharia arbitrage,” he said.

Mr Mohamed recommended that CBK makes it mandatory for Islamic Financial Institutions to adhere to standards set by Accounting and Auditing Organization of Islamic Financial Institutions (AAOIFI) rather than the International Financial Reporting Standards (IFRS).

“At the moment, we cannot differentiate balance sheets of an Islamic bank and a conventional bank whereas their concepts of running business are totally different,” he said.

He further called for serious vetting of Sharia advisors and top management of Islamic banks arguing that presence of “Sharia literate directors would discourage precedence of profit making motive over compliance to Sharia’a principles.”

Islamic banking is a moderately new concept in Kenya with two banks, Gulf African and First Community offering the services.
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