Central Bank of Kenya (CBK) has confirmed receiving a licence request from the Dubai Islamic Bank, which plans to expand into Kenya’s nascent but fast-growing Shariah banking industry.
UAE’s largest Islamic banker also said on Monday it would buy a quarter of Indonesian lender Bank Panin Syariah in its international expansion push into new lucrative markets, with an option of increasing the stake in the listed firm to 40 per cent.
“(The) CBK has been approached by Dubai Islamic Bank of United Arab Emirates to open a bank in Kenya. This is the first step in the licensing process before a formal license application is submitted,” the regulator told the Business Daily.
The bank has reported plans to open a fully-fledged unit, possibly by the end of year.
Should Dubai Islamic Bank open the Kenyan operation it will join First Community Bank and Gulf African Bank as the other fully Islamic banks in the market.
Kenya’s unbanked Muslim population and the popularity of ethically-linked financial instruments are creating a niche market for financial institutions.
“The scarcity of such products has seen clients willing to pay a premium. The enactment of more stringent laws by the Central Bank of Kenya (CBK) has seen the ease of conducting Islamic banking and insurance increase in Kenya thus improving its potential as a viable and profitable venture,” said an insurance sector report by Sterling Capital.
The increase in trade between Kenya and the Middle East is adding to the demand for Shariah-compliant products as mainstream banks also eye a share of this market.