Customers at the Gulf African Bank. The bank offers a wide range of Shariah based products. Photo/FREDRICK ONYANGO
Gulf African Bank has posted a profit for the first time since it opened its doors to business in 2008 in its three months to March 2010, raising hopes for its investors to earn their first return on their Sh1.75 billion investment.
Unlike its peers in the banking sector that have posted double digit growth in earnings, the bank which lends on Islamic principles managed to grow its earning by 127 per cent to propel its pre-tax profits to Sh25 million in the first three months to March 2010.
For the two years that the bank has operated in Kenya, it has posted losses in successive years of Sh382 million and Sh162 million, showing that the bank has had a strong growth rate.
The returns have been powered by increased lending that now stands at Sh5.2 billion, 128 per cent higher than a corresponding time last year which is in line with the Central Bank’s analysis of the sector.
“The latest stress tests show that the banking sector is healthy. The committee noted an increase in gross loan and the number of loan accounts,” said CBK governor, Njuguna Ndung’u, in the latest monthly review.
Customer deposits also grew significantly to almost double the levels of the first quarter 2009, to top Sh8.2 billion, which would be a sufficient war chest as the bank seeks to grow its loan book.
The impressive results come at a time when the bank had just concluded the second annual East and Central Africa Islamic Finance Conference that had sought to deal with the challenges that Islamic banking is facing in East Africa.
“There is a move by countries in the region to permit their institutions to offer Islamic products and the CBK is sharing its experience in Shariah-compliant banking with other Central Banks in the East African Community,” said Prof Ndung’u.
Participants in the conference who included the bank’s chairman and other shareholders from the Gulf region highlighted the growth prospects that Islamic banking has in the region with the governor promising to sell the idea to other East African countries.
Interest in Islamic banking, a concept that was introduced in Kenya by the Gulf African Bank, has stirred interest with other banks like Chase Bank developing similar products that encompass the Shariah banking laws while the First Community Bank has always offered the model.
Among the products that the bank has developed is a savings scheme for people who plan to attend the annual Muslim pilgrimage that offers the highest interest at 3.8 per cent, while a children’s savings account earns a return of 2.7 per cent.
Unbanked population
The banks offering this type of banking have been critical in reaching segments of the unbanked population, especially members of the Muslim community whose banking needs were not sufficiently addressed by the mainstream institutions.
Now, the bank has a total of 12 branches, and is exploring extending services to the rest of East Africa, a practice that other banks have adopted thanks to impressive growth recorded.
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