The National Bank of Kenya (NBK) has ventured into Islamic banking with a range of financial services targeted at the growing market to boost income and reverse last year’s dip in profits.
The bank has hired Mr Molu Halkano, who was head of credit financing at First Community Bank, to drive its newly created Islamic Banking unit dubbed National Ammanah.
The bank has been lured into Sharia-compliant banking by the large unbanked Muslim market which accounts for about a fifth of Kenya’s population as well as the high growth posted by Islamic banks in Kenya.
“This new product is geared towards boosting the bank’s penetration of retail and corporate market segments; and provides our clients with greater choice,” said NBK managing director Munir Ahmed at the launch of the product on Monday.
“We will use it in our growth plan to open new branches in North Eastern and Coast counties which are Muslim dominated areas.”
NBK has installed the iMAL Islamic Core banking system from Path Solutions, a Kuwait-based tech firm. The bank’s core banking system for its conventional products is BankFusion developed by British firm Misys.
Fully fledged Islamic banks such as Gulf African Bank and First Community Bank outpaced their rivals in conventional banking by posting triple-digit rise in profits helped by lending to peers, households and companies.
Gulf African Bank posted a 154 per cent growth in net profit to Sh242.2 million as First Community Bank’s profits rose 238 per cent to Sh241.3 million in the fiscal period ended December last year.
Data from the Central Bank of Kenya shows that the two banks had loaned out a total of Sh15.4 billion and had Sh19.5 billion in deposits as at the end of February this year.
“These numbers show how Sharia-compliant banking is gradually becoming a major player in the banking sector,” said CBK governor Njuguna Ndung’u. “We see it as a step towards achieving financial inclusion and deepening access to banking services.”
Sharia banking, which is also open to non-Muslims, is characterised by low transaction charges as Islamic law forbids charging interest on financial services and conventional financial practices such as speculation and gambling.
NBK joins Barclays, KCB Group and Chase which have launched such products.