Gulf African Bank on Kenyatta Avenue in Nairobi. File
Gulf African Bank has announced plans to expand into the East Africa region as its Kenyan operation is poised to record a full-year profit for the first time since its launch in 2008.
“We will open two more branches in Kenya by year-end, bringing our total branch network to 16. Next year, we plan to venture into Uganda and Tanzania, after which we should have a total of 18 branches in the region,” said chief executive Najmul Hassan.
The second Islamic bank in the country made a net profit of Sh42.7 million in the nine months to September, reversing a loss of Sh208.8 million in a similar period last year.
“We expect to perform even better in the fourth quarter and become self-sustainable thereafter,” he said. The improved performance was driven by an increase in lending and transactional activities. Loans and advances grew from Sh3.75 billion to Sh5.57 billion, nearly doubling interest income to reach Sh473.2 million. Transactional income, including forex trading and fees charged on loan processing, more than doubled to reach Sh216.7 million.
Total operating income stood at Sh641.3 million, up from Sh382 million. Total operating expenses grew by Sh7.8 million to stand at Sh598.6 million.
Reduction in fixed expenses
A reduction in fixed expenses like staff costs helped reduce the effect of a spike in interest paid to depositors that more than doubled to Sh74.7 million on account of increased deposits.
Customer deposits rose by Sh1.5 billion to stand at Sh7.39 billion. The bank, whose total assets has grown to Sh8.75 billion, is also planning to venture into the nascent Islamic insurance field, also known as Takaful in Islamic parlance.
Its sponsor and principal shareholder, GulfCap Investments, has announced it will raise Sh1 billion as capital to roll out an insurance arm next year, following hot on the heels of Cannon Assurance, First Community Bank, and CIC Insurance that have started issuing general Islamic products like property and motor vehicle covers.
Mr Hassan said offering takaful will help the bank to position itself as a one-stop shop for Islamic financial services. Unlike conventional insurance, people seeking Takaful covers pay premiums to a collective fund from which payments are made to members who suffer from risks covered. Any residual cash after all payments have been made in the financial year is paid out to members as profit.
Consumer apathy
The players are seeking to deepen penetration in a market where conventional insurance has suffered from consumer apathy and ignorance, with uptake remaining at below three per cent over the decade.
Morgan Stanley, a global financial services firm, says in a research note that takaful premiums in Kenya could potentially reach Sh20 billion in 2014, or 31 per cent of total insurance premiums last year. Kenya has 4.3 million Muslims, according to the 2009 census results.
“Muslims have for long been excluded from financial services, and the sharia compliant covers we are creating should help improve uptake,” CIC Insurance managing director Nelson Kuria said in an earlier interview.
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