Middle-east Arab News Opinion | Asharq Al-awsat

Kenya: The Gateway to the Dark Continent | ASHARQ AL-AWSAT English Archive 2005 -2017
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Riyadh, Asharq Al-Awsat – When I began writing this column over three years ago I set a number of targets that I wanted to achieve. One of these targets was to alert businessmen and Islamic financial institutions to the opportunities available to the Islamic banking industry for growth and expansion either via entering new markets or developing their operations in markets that they had been neglecting. This is in accordance with the hadith of the Prophet [pbuh]: “Whoever guides to some good will receive the same reward as the doer.” The Prophet [pbuh] also said: “When the son of Adam dies his actions come to an end except three things, a continuing charity or knowledge which gives benefit or a pious child who prays for him.” This reminds me of the famous verse of Arab poetry which reads, “A book lasts for years following the death of its writer, while the writer is buried under the ground.”

As a result of this I only want to leave behind what will benefit me in the afterlife, and therefore within this framework I am today writing about Islamic Banking in Kenya. Kenya is located in east Africa and enjoys relative political stability. The capital of Kenya, Nairobi, is considered an important political and economic centre in east Africa. It also enjoys a strong infrastructure and is home to a large group of qualified professionals. Kenya enjoys strong economic growth and has an annual growth rate of between 5 and 7 percent. The Kenyan government has also outlined an ambitious economic vision that extends to 2030 which will – if successfully implemented – put Kenya on the map as an important financial centre on the same level as the Asian tiger economies.

This plan also includes encouraging the Islamic banking industry and working to attract Nairobi to this industry, thereby transforming it into a centre for Islamic banking in Africa. The Islamic banking industry has a weak presence in this continent, and its assets do not exceed 15 billion dollars which represents only 2 percent of the market share. More importantly, there are only 37 Islamic banks in Africa, most of which are small operations and incapable of achieving a significant breakthrough in the banking industry. This represents something of a paradox, as 45 percent of the overall population of Africa are Muslims, and Africa has a population of almost one billion people; in other words, the Muslim population of Africa stands somewhere in the region of 400 million people. This is clear evidence of the lack of determination of the Muslim countries, people, and institutions, and their lack of goals and targets. This is one of the main reasons for the Islamic banking industry’s delay in entering the African continent, which is still the subject of fierce competition between international parties from China in the east to Europe and the US in the west yet rich Islamic countries are absent from this scene, particularly the Gulf States. However I still believe that the Islamic banking industry can gain a foothold in Africa, especially as it is experiencing increasing success in Kenya.

The Kenyan government has backed up its words with action and is pursuing its objectives for 2030 and is seeking to attract foreign investment, including investment from the Islamic banking industry. The Central Bank of Kenya has licensed the establishment of two Islamic banks; the First Community Bank, which is the largest Islamic bank in Kenya and has capital of one billion Kenyan shillings, and the Gulf African Bank, which has a working capital of 800 million Kenyan shillings. In their first year of operations, the banks were able to collect assets worth 8 billion shillings which is equivalent to 0.6 percent of the market share. The two banks also saw deposits worth five billion Kenyan shillings.

The Gulf African Bank ranked 32 [in African banks] while the First Community Bank was number 41 on the list of 43 banks in terms of gross assets. The indisputable fact is that the African market in general, and the Kenyan market in particular, offer excellent prospects to the Islamic banking industry, especially when looking at the stable growth in the banking sector in Kenya and the number of bank accounts in Kenya have risen from 2.6 million in 2005 to 6.4 million in 2008.