Islamic banking is operated under the principles of Sharia law which, among other practices, prohibits the charging of interest on loans.
Arrie Rautenbach, Absa’s head of retail markets, said in an interview Islamic banking had always been a strategic initiative for Absa.
This was shown by what he said were the "pioneering" propositions that the Barclays-owned bank had brought to the market.
"Our purchase of the only Islamic Insurance company (Takafol) in South Africa and recent launch of the Sharia Forward Exchange contract bear testimony to this," Mr Rautenbach said.
The purchase by Absa last year of Takafol SA — which then claimed to be the only firm offering Islamic insurance in South Africa — was part of its plan to expand its offering of Islamic financial services and products.
When it made the acquisition, Absa also said it would expand Islamic insurance in Africa.
Mr Rautenbach said Islamic banking would continue to be a key focus area for Absa, which last week announced it would purchase the majority of Barclays Africa’s portfolio in an all-share deal worth R18.3bn.
The deal was part of a strategy by Barclays and Absa to create a dominant "go to" retail bank in the region where it would have more than 14.4-million customers and over 1,300 branches, according to Ms Ramos.
Mr Rautenbach said there was a growing demand for Islamic banking products in South Africa and across the region.
"The need for Islamic banking products on the Africa continent cannot be over-emphasised," said Mr Rautenbach.
"We are engaging our stakeholders in Barclays to assist with the launch of Islamic banking in certain African jurisdictions including Egypt, Tanzania, Uganda, Ghana and Zambia," he said.
Absa’s rivals in South Africa also offer Islamic banking products, but Absa claims, without giving figures, to have the largest market share.
"Our largest customer base is currently in South Africa. We have the largest Islamic financial services market share in South Africa (and) we have also noted growth in Tanzania," he said.
Mr Rautenbach said Absa would differentiate itself from rivals offering Islamic banking services particularly through innovation.
"Our uncompromising Sharia governance framework and the manner in which we leverage of the Absa brand and distribution network are critical success factors," said Mr Rautenbach.
On Monday, Absa appointed Afzal Seedat has head of its Islamic banking unit with effect from next month.
Mr Seedat is head and executive director of Absa Trust. He will fill a position that was left vacant over six months ago by Amman Muhammad who is now the strategic head of FNB Islamic Finance.
Mr Rautenbach said Mr Seedat’s appointment was in line with Absa’s approach to develop and promote internal talent.
"In order for us to effectively execute on our retail market priorities, we need to have strong leadership that has the necessary skills set to successfully implement our strategy and achieve business objectives," he said.
(Business Day Live / 10 Dec 2012)
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com