United Arab Emirates (UAE) lender, Dubai Islamic Bank, is set to start operations in Kenya as the Government seeks to issue a Shariah-compliant Sukuk bond. Kenya aims to become a regional hub for Islamic banking while setting the sector as a source of development funds because of the large number of Muslims in Kenya. The dream inched forward yesterday with the licensing of the Dubai Islamic Bank which is set to operate locally as DIB Bank Kenya Limited (DIB).
Central Bank of Kenya (CBK) said the move will help support the long-standing economic ties between Kenya and the UAE. “DIB’s entry into Kenya is anchored on its strategic focus of enhancing its international presence,” it said. “Its business model is underpinned by excellence in customer service, innovation, growth and consistent employee engagement.” DIB is one of two banks that CBK has given the nod to launch operations since it lifted a moratorium issued in 2015 on licensing of new lenders. The other is Mayfair Bank, which is being fronted by Kenyan investors. The UAE bank’s entry also signifies a growing demand by Gulf companies and billionaires who want a foothold in the Kenyan market amid tough competition from the Chinese firms. DIB, the largest Islamic bank in the UAE, recently celebrated its 40th anniversary. It is principally owned by the Investment Corporation of Dubai (ICD) which holds a 28 per cent stake while billionaire Saeed Ahmed Lootah, also its founder, has a 6.9 per cent shareholding. ICD is the principal investment arm of the Government of Dubai. Spur competition An international bank with presence in Bosnia, Indonesia, Pakistan, Sudan and Turkey, the lender is expected to spur competition in Islamic banking. Its asset base of $47.6 billion (Sh4.8 trillion) and a capital of $7.4 billion (Sh7.5 trillion) is a war chest that will give the two local Shariah-compliant banks a run for their money. Gulf African Bank Limited was licensed in 2007 while First Community Bank started the following year. Unlike other business models, Islamic banking prohibits collection and payment of interest and is based on profit-sharing. Under Islamic law, money must not be allowed to create more money and a bank must provide some service to “earn” its profits. Thus, instead of traditional accounts with given interest rates Islamic banks provide accounts, which offer profit or loss.
Originally published on www.standardmedia.co.ke