Why Sharia-compliant economy is growing fast
Posted Friday, October 15 2010 at 00:00
Ongoing expansion of the Muslim segment of Kenya’s newly rich is rapidly changing the face of business in the country in favour of Sharia-compliant offers that are taking root across all segments of the consumer market.
This year alone, the Kenyan capital Nairobi has seen huge investments in Halal products targeting the Muslim population whose growing numbers and economic power was confirmed only this year with the release of the census results.
It all started a few years ago with the emergence of restaurants offering Halal foods -- which meant mainly avoiding pork and alcohol and sourcing meat from animals slaughtered in accordance with the Islamic principles.
But this wave of compliance with Islamic principles has rapidly spread into the financial services sector which now boasts of Islamic banking, bonds, and most recently insurance.
The consumer market has rapidly followed suit with the introduction of cosmetics, real estate deals, hotel and travel services that are Sharia compliant.
The Government of Kenya has not been left behind as Central Bank of Kenya is on course to floating Sharia - compliant bonds for infrastructure projects with an eye on rich investors in the Middle East.
Kenya’s 4.3 million Muslim population, whose numbers have more than doubled in the past two decades and are richer than ever before is being seen as the reason for main driver of the attention business is paying to their interests.
It has also helped that Kenya has become the natural destination of choice for thousands of rich Somali Muslims fleeing two decades of war in their country.
Sharia law bars financial services providers from earning or charging interest and instead offers a return to savers by sharing profits from ethical businesses that do not include alcohol, tobacco and gambling.
“There is a huge market for halal products and services,” said Dr Hassan Anandwa, a scholar at the Thika College for Sharia law and Islamic Studies.
“We have seen growth from the food segment and the nascent financial services to new areas like hotel and accommodation. Halal hotels in Nairobi and parts of Mombasa are now popular with Muslim faithful.”
Dr Anandwa added that Halal products are moving to the mainstream and appealing to non-muslim consumers looking for high quality ethical products, especially food and banking products.
In Kenya, the Halal economy is dominated by the food market — but financial services that comply with Islamic law and the teachings of the Koran are gaining prominence.
Barclays Bank was the first financial institution to test the market with a sharia-compliant product in December 2005 and since then Islamic financial products have exploded on to the market with at least eight commercial banks including KCB tapping into this market.
Two Islamic driven banks with roots in the Middle East — Gulf African and First Community — opened shop in 2008 and have since moved to the profit zone illustrating the vibrancy of the Halal economy in the country.