Banks offering Shariah-compliant products are unable to meet growing demand for the products, Kenya Bankers Association chairman Habil Olaka has said.
The Kuala Lumpur-based Islamic Financial Services Board said globally, demand for banking services and products that comply with Sharia law is increasing by about 15 per cent annually. “We expect more conventional banks to realise there is a gap in the market and to start coming in to ensure they fill it,” Olaka said.
There are three fully fledged Islamic banks in Kenya - First Community Bank, which was the first to get its licence on May 29, 2007; Gulf African Bank, which got the approval in 2008 and Dubai Islamic Bank in April last year.
Other banks have opened the Islamic banking window, which is a specialised operational entity rolled out by a conventional institution which aims to meet the demand of customers.
TRADE FINANCING
The lenders offer deposit taking, withdrawal services and others offer trade finance. They include KCB and NIC bank.
Islamic finance and banking products emphasise the sharing of profits between the bank and customer, safekeeping of savings, joint ventures and leasing which are available in conventional banks, only that they have to be in accordance with Sharia Laws.
“In Kenya, the growth of Islamic banking and finance has gained momentum in the last decade and the country is fast developing into an Islamic Finance hub for East Africa,” Barclays director of retail and business banking Zahid Mustafa said.
However, speaking after the launch of Islamic trade financing, Barclays Kenya head of commercial and business banking Paul Wainaina told the Star most banks offering Islamic banking lack the capacity to adequately cater for the growing demand for Sharia compliant products.
“We have very few banks offering working capital when it comes to Islamic trade finance and those that are do not have the capacity to meet the market demand,” he said. “We have many banks whose capital base cannot allow them to do that.”