Boss Talk

Abdullahi Adan: Banker leads Kenya's first shariah-compliant investment bank at SIB 

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Abdullahi Omar Adan. ILLUSTRATION | JOSEPH BARASA | NMG

After building Somalia’s Sombank from the ground up as CEO, Abdullahi Omar Adan is on to his next challenge of leading Kenya's first Shariah-compliant investment banking arm — SIB Najah — armed with more than 17 years of experience in banking and management.

How was your experience building a bank from the rubble and living and working in Somalia?

Having worked on the inception of Islamic banking in the region, which began in Kenya, gave me quite the experience having worked at First Community Bank before moving to Chase Bank and Gulf African Bank. Somalia is, however, a completely different market.

Starting out, the dynamics were different, the level of the industry was lower than where Kenya was. For me, it has been a really good learning experience in terms of the new markets, dynamics and the culture which is quite different from Kenya.

How has that experience moulded you for your new role at Standard Investment Bank?

I can use that experience in building a bank from the ground up in setting up Kenya’s first Sharia-compliant investment bank. I have experience in setting up institutions having joined First Community Bank at its setup stage in 2007.

At Chase Bank, we formed the first Islamic banking window that has given quite the experience. With the new role at SIB, it shouldn’t be such a difficult task given the experience.

What has been the reception so far for SIB Najah?

So far, Mansa X Shariah, which is a Shariah-compliant version of the bank’s multi-asset strategy fund has gained more than Sh170 million in assets under management since its inception late last year.

Who is SIB Najah's target client?

Any Muslim client or any ethical investor who is looking for investments both locally and internationally, be it a retail, corporate or institutional investor would make a target client. We are a local investment bank that will be able to help investors to trade with the domestic and global markets without looking for any external counterparties.

What other products can your clients expect?

We have set up a corporate advisory unit within SIB Najah where we will basically offer corporate advisory services for companies and businesses across the board. Our major goal is to issue the first corporate Sukuk in the market, which should happen within this year.

We are also positioning ourselves to take advantage of opportunities from the government diversifying its funding sources.

We will also advise potential clients who want to invest in stocks, in the domestic market and offshore where we will help in screening the investments for Shariah compliance.

What do you feel is the space for Shariah-compliant products in Kenya?

I think it is huge. To give examples, before we even look externally, the Muslim community currently is not in a position to participate in government securities, which makes for a huge segment of the market left out. We have three fully fledged Islamic banks, we have three Islamic windows in operation, Islamic pension funds and two Islamic saccos, all these institutions are potential investors for the government but can’t.

Externally, the entire Middle East is looking for investment opportunities outside their countries and their key guide for them is whether the investments are Shariah-compliant [or not]. This is an open opportunity for the government to attract all those markets. We also have ethical investors who might not necessarily be Muslims and are looking for ethical investment opportunities.

What remains to turn the potential represented by the Shariah-compliant institutions and investment vehicles into tangible outcomes for the economy and country?

I think from the private sector perspective, we are more than ready and have the capacity. It’s probably now for the government, as they have done on green bonds, to have a Cabinet resolution to issue the first Sukuk bond. The government should put the legal frameworks in place to issue the products we have the capacity to do.

One of the challenges faced by Islamic commercial banks is the absence of the Islamic Banking Act. That has exposed banks to double taxation for some of the Islamic contracts. For instance, a bank doing a Murahaba (cost-plus financing) is supposed to own the asset they are financing where they pay tax on it and still have to pay tax when transferring it to the client.

The adoption of the Act would ensure taxation happens once and not twice in the same transaction. These are some of the hindrances for Islamic financial institutions.

Having been a pioneer in the creation and growth of Islamic banking in Kenya and the region, what is your vision for the industry?

For me, having been part of the invention of Islamic banking from the commercial banking aspect, the goal is to try to complete the cycle by creating the first Islamic investment bank. The dream for me is to be part of completing that ecosystem.

Secondly, to make sure that regulatory frameworks are in place for the industry to comply from a Shariah perspective. Hopefully, one day, I can look back and see my role in the positioning of Kenya as the hub for Islamic finance in the region and sub-Saharan Africa. Then, I’ll definitely note that we have reached where we wanted to be.

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