Islamic banking and financial services in Kenya have registered phenomenal growth over time and are now easily accessible thanks to liberalization by the regulator.
A thriving Muslim population in the country especially in urban centers running robust small and medium enterprises has led to high liquidity – attracting major financial institutions offering sharia-compliant services.
Every turn you make on the busy Nairobi Central Business District – home to major financial institutions in Kenya – it is hard to miss a lender offering Islamic banking and financial services.
And the slow takeover of Nairobi CBD malls and cafes by the Islamic populace sets the stage for a hunting ground by financial institutions.
But with all these factors and a surge in commercial lenders, we are yet to see a deeper penetration by the sector.
Africa accommodates 150 operating Islamic banks with over $ 2.7 trillion in total combined assets and it is projected to hit the $ 4 trillion mark by 2023. However, almost 80 percent of Islamic banking and finance operations are taking place in the Middle East and Asian countries.
Back at home, the upsurge of Islamic banking and financial products has created an opportunity for commercial and SME lenders to innovate and come up with attractive packages to gain competitive advantage.
But there is good news and prospects for growth. Barclays Bank of Kenya is credited with being the first lender to introduce Shariah-compliant banking products on a window basis.
In 2006, Kenya Commercial Bank (KCB) joined the list. Then came in droves- the fully-fledged Islamic lenders such as Gulf Africa Bank, First Community Bank, and SBM Bank among others.
Takaful Insurance Africa, the first Shariah-compliant Takaful insurer was also licensed thereafter. A subsidiary of Dubai Islamic bank commenced operations in 2017 in Nairobi and Mombasa, and Savings and Credit Cooperative Organizations (Saccos) have also launched Shariah-compliant products in response to growing demand.
The interest-free banking and finance is a good solution for banking and financial needs. Experts agree that interest-free finance is fast growing in African countries. But they further advice on the need “to explore the untapped potential of interest-free finance market of Africa and to adopt the latest trends”
So how can we nurture this industry in Kenya?
Kenya needs the establishment of a legal and regulatory framework for Islamic banking to improve investment flows.
Awareness has to be created on the advantages that can be gained from this space. And lack of the above gives room to the challenge of appreciating the role of the Shariah scholars in the Islamic banking sector.