KBA CEO CHAT - Islamic Finance for SMEs

CEO | Abdalla Abdulkhalik, Managing Director, CEO
MONTH | February 2018
Chat Admin
Good morning and welcome to the first KBA CEO Chat of 2018. Today we are pleased to be welcoming Abdalla Abdulkhalik CEO of Gulf African Bank as our host. The topic is Islamic Finance for SME’s. Thanks for making the time to join us!
nuru mugambi
Looking forward to it
Chat Admin
Welcome Nuru, Welcome everyone
Chat Admin
We are about to begin the chat
Chat Admin
We will focus on the following three areas: The role of financial sector players (banks, capital markets, private equity) in promoting trade National and county policy and investment opportunities towards diversifying Kenya’s external trade portfolio Financial products such as Islamic Finance that SMEs can tap to grow their businesses We invite you to start posting your questions now so that we can get straight into the discussion once Abdalla joins us. Looking forward to an engaging chat session.
Richard Odawa
anxiously waiting for it
Chat Admin
Thank you Richard
Chat Admin
We would like to recognize any new user. Let us know if this is your first time to join the chat!
Alex Mugo
Good morning, checking in......
Chat Admin
Welcome Alex
Alex Mugo
Thank you Admin
Chat Admin
Welcome Susan, Onesmus Diane and Julian
EDWARD MWANGI
Happy to be here..... :-)
Julian Kamau
Thank you, glad to be here!
Chat Admin
We are happy to have you all
Chat Admin
Please remember: Today we will focus on the following three areas: The role of financial sector players (banks, capital markets, private equity) in promoting trade National and county policy and investment opportunities towards diversifying Kenya’s external trade portfolio Financial products such as Islamic Finance that SMEs can tap to grow their businesses We invite you to start posting your questions now so that we can get straight into the discussion once Abdalla joins us. Looking forward to an engaging chat session.
Diane Meria
Thank you, happy to be here
kenneth gichomo
appreciated to join
Chat Admin
Happy to have you Kenneth
kenneth gichomo
thank you
Chat Admin
We welcome those joining us. We are starting the chat in a few minutes
Rayhab Gachango
From what I have read Islamic banking seems to have a fairer way for somebody to get money to invest in assets. But the information about Islamic finance is not really out there. What are the banks doing to create more awareness out there about the products and encourage SMEs to try it out.
Chat Admin
Welcome Rayhab and thank you very much for your question
brian ondisi
first time to be here.....looking forward to my first chat with a ceo....
Chat Admin
That`s great Brian, thank you for joining us. We hope you will enjoy the chat.
Richard Odawa
How can the Islamic market be tapped considering the belief they have regarding Interest Rates - (riba). Whic way can we be able to penetrate the bigger market as far as product and service strategy is concerned. NB: as much as there are some who dont follow the said belief to the latter.
Chat Admin
Thank you for your question Richard
Linus Mike
Glad to be hear..
Chat Admin
Remember, you can upload your photos on your profiles. The CEO will be happy to see the people he is chating with.
Chat Admin
Thank you for joining us Linus, Nadhir, David, Raphael, Jacqie and everyone else!!
Nadhir Mohamed
Thank you Admin, looking foward to a fruitful discussion
Jacqie Abuga
Thanks Admin
RAPHAEL KURIA
Thank you admin
Eric Asuma
Thanks for the opportunity KBA & Gulf African Bank, I am very keen on the opportunities of development and growth as well as the main challenges to Islamic finance for SMEs in Kenya.
William Kimari
Hello Mr. Abdall Abdulkhalik
maina NJUGUNA
Glad to be here too.
maina NJUGUNA
On the issue of SMEs, especially those that are based at the counties, do you offer LPO financing?
Diane Meria
@harrymafi is inquiring about the role islamic bankig plays in improving Kenyan education
Chat Admin
Welcome Mr. Abdalla
Abdalla Abdulkhalik
Good morning everyone and welcome to the KBA CEO Chat. Im pleased to be here.
Susan Muigai
Good Morning,
Abdalla Abdulkhalik
Our discussion today is on SMEs (small and medium sized businesses) and the importance that the banking industry is giving to this sector which contributes over 60 percent of our country's GDP and more than 80 percent of employment.
Florence Kamaitha
Q: If i am not a muslim, can i get a product from the bank tailored for my business?
Abdalla Abdulkhalik
Rayhab, I see your question that you posted earlier. Its a very good point.
edwin obino
why is it that islamic banking has not been much publicised in kenya?
Abdalla Abdulkhalik
I think Islamic banks have not created enough awareness about the product offering and we definitely need to do more. Especially to clear the perception that Islamic banking is only for Muslims, which its not.
RAPHAEL KURIA
Q:In line with the first topic of the role of banks in promoting trade,how can banks partner with struggling businesses to access finance,especially whose historical performance has not been good(ie having a negative balance sheet,more liabilities than realisable assets) yet they have a bright future?
Susan Muigai
Please elaborate further on Islamic Banking. There are several myths out there, especially on Florence Kamaitha's point. Can anyone access Islamic Banking?
victor oele
Morning Sir? How can i access business loan from your bank, and Iam not a Muslim?
Abdalla Abdulkhalik
I think we need to do more on the awareness...in the past we have held islamic finance conferences both in nairobi and mombasa to create such awareness...and invited scholars from around the globe to come and talk about it. We will make sure we do more of such events in the future. This CEO Chat platform is also another opportunity for people to understand the product. As Gulf African Bank we have also conducted several workshops in different towns, including Nakuru, to raise awareness.
Stephanie Kimani
I agree with you Mr. Abdalla, the perception is that islamic banking is only for Muslims. Perhaps it is on the way it is publicized to the market. Sensitization would be key to break that perception.
Rayhab Gachango
I have read a lot about Islamic Finance. But apart from hearing that banks have launched it I have never seen anybody approached about it. Which ends up leaving the impression that its for Muslims only
David Kamuyu
Hello Abdalla. In Agricultural financing (Start-ups). Are there frameworks that exist, where funding can be secured on targeted field yields. Where the bank can sell the yield on behalf to obtain their fundings?
Susan Muigai
Mr. Abdalla, please elaborate on the investment opportunities on offer to your customers; i.e SMEs, retail and institutions. Thank you
Abdalla Abdulkhalik
Welcome Richard...you raise a similar point with Rayhab...one doesn't need to be a Muslim or follower of Islamic faith to access Islamic finance. Islamic banking is only 10 years old in Kenya...I think we have made remarkable progress during this time with the support from the Central Bank of Kenya. What we need to do now is to get Islamic Banking recognized formally in the Banking Act and therefore recognized officially as a product that is accessible to all Kenyans.
Florence Kamaitha
For a non muslim, what is the first thing they need to know when trying to access your products. In terms of interest rates for savings and loans etc
Abdalla Abdulkhalik
Kenya has an opportunity to become the hub of Islamic banking for the East Africa region, given the way we are so advanced already in terms of our Islamic financing product offering; and the number of Shariah scholars that we have; and therefore we have a great opportunity to take advantage of.
Abdalla Abdulkhalik
Welcome Eric...thanks for joining us and for the comment.
Stephanie Kimani
Q: Mr. Abdalla, you have mentioned that Islamic banking is not formally recognized in the Banking Act. Does this mean that depositors are not protected by law?
Onesmus Mukewa
Hello Mr. Abdalla... We have seen SACCOs like Taqwa come up to fill the gap. What do you foresee in the coming future? Do you think more Islamic SACCOs and MFIs/MFBs will crop up to bridge the gap? Also, what is your favourite Core-Banking platform? Are they offering support for Islamic banking without spending a fortune for Islamic Banking support? What really is stopping banks from taking up this market aggressively.
Abdalla Abdulkhalik
Hi Maina ... there is an Islamic version of LPO financing. LPO financing is a form of advance payment against a receivable from a third party. So for example if you have a payment due from the Government for services rendered, banks can give you today the amount that the Government owes you. This type of a credit facility enables you / SMEs to continue with your day to day work as you wait for payment. In Islamic Finance, we follow a certain procedure but the product is largely the same.
Haji Mohamed
Good Morning just joining Chat.
Erick Onyango
Good morning, I just joined the chat platform
Lilian Ruto
Goodmorning i just joined
Abdalla Abdulkhalik
Hi Edwin I hope you saw my earlier point...we are working on increasing awareness.
Erick Onyango
how best can islamic financing help in acquiring property on long term investment plan?
Lilian Ruto
Mr. Abdalla I would like to understand more about RIBA
Haji Mohamed
Asalamu Alaikum Abdalla, What plan do you have to give awareness to SMEs on area they can invest, with less lisk of business to go down and how do you followup with so that to give them guidiance?
edwin obino
Thanks Sir. I just read it. Please put in more effort in building awareness
kevin mwanzo
First time here, following the conversation.
Abdalla Abdulkhalik
Welcome Raphael...you raise a very good point...unfortunately the point you raise about business performance and challenges with accessing finance is real and common for especially micro and small businesses. There are two challenges that financial institutions face: 1) to finance institutions that have performed poorly in the past and 2) to finance startups. Its actually easier to finance a startup than a business that has losses beyond the invested amount. Therefore supporting small businesses that are in the red is something that needs to be addressed at a policy level.
Ezer Kipkurui
How have you incorporated or embraced technology to suit your products considering the dynamics in technology?
Abdalla Abdulkhalik
Hi Florence and Victor...Islamic products are available to every Kenyan regardless of their faith. So please visit any of our branches.
Abdalla Abdulkhalik
Hi Susan, please clarify what you mean by investment opportunities for customers.
Susan Muigai
are there any investment opportunities in the capital markets for your clientelle? Thanks
Abdalla Abdulkhalik
Stephanie, deposits held by Islamic banks are protected under Central Bank of Kenya Regulations and therefore are treated the same as deposits held by other banks.
William Kimari
Dear. Mr. Adulkhalik,
William Kimari
My firm applied for a revolving facility at Gulf African Bank late 2017.
Abdalla Abdulkhalik
Onesmus you may be a fellow banker based on your very insightful points!
Eric Asuma
Hi Abdalla, could please touch on the rates charged on Islamic Financing facilities versus the conventional banks.
Abdalla Abdulkhalik
It is true that there are new Islamic Savings and Credit Cooperatives or SACCOs that are coming up and we are also seeing increased interest from the conventional SACCOs who wish to offer Islamic products. This trend is good because it provides diversification and more opportunities to bank customers.
William Kimari
Despite the process going toward approval from branch, to analysis and to HO, communication went quiet despite physical follow-up visits to the HeadOfiice. Eventually we were left with no choice but to communicate our intent to close the account and abandon the loan process in January 2018
Abdalla Abdulkhalik
Regarding the IT infrastructure for Islamic banking there is a specific way that the deposits and credit are booked and processed. The cost difference is not material.
Diane Meria
How do the rates in islamic banking compare to the rest of the banks?
Diane Meria
Also what is the impact in case CBK repeals the interest rate cap?
Kelvin Munyeki
Are there plans and efforts to create awareness countrywide in regard to islamic banking?
Abdalla Abdulkhalik
Thank you Erick Onyango, long term investments are done through a product called Musharaka which means 'partnership' . The bank would invest in the asset jointly with the customer. For example if it is a house, you would pay the bank 20 percent and the bank contributes 80 percent. Therefore the house is owned by both the customer and the bank on the title deed. Then the customer would gradually by 'shares' from the bank over the agreed period (eg 10 or 20 years)...and these shares would be bought until the customer pays off the full 100 percent. The bank would then transfer their portion back to the client.
Patrick Githaiga
i am an IT software developer who deals in customized e learning platforms that enable banks to have continuous training within the staff members and as well to be able to do capacity building.I am a fresh graduate from campus and currently persuing my MScIT on security aspect as well.I would like to demonstrate my system and how it works given a chance to do so.
Marisi Perminas
Quite an insightful discussion. Mr. Abdalla, we have seen a remarkable decline in banks willing to give credit to SMEs and even individuals especially after the interest capping. This is in turn affecting the growth of the economy.Is this a similar challenge that is also affecting Islamic banks sch as yours? In your opinion, how can this unfortunate credit crunch be reversed to this while also remembering that protecting the populace against exorbitant and arbitrary interest rates is the right thing to do.
Chat Admin
Thank you all for the questions and comments shared. We are entering the final 10 minutes of today`s chat so if you have any final questions please post them so that we can have time to answer.
Abdalla Abdulkhalik
Hi Lilian, in Islamic Finance, we do not charge interest for money. As in the house example I gave earlier, the customer and the bank get into a joint agreement / partnership for an asset. Partnerships or trade is what is allowed in Islamic banking.
Stephanie Kimani
Q: Referring to you answer to Erick, the customer would pay back the full value of the house over the period as opposed to the 80% the bank owns? Also, that means that the 20% owned by the customers acts as the 'interest' for the bank? I am just trying to understand how the Musharaka product makes money that is as competitive as other non-Islamic products.
Fred Mutisya
Great Insights so far. Q. One of the four economic pillars of the present government is affordable housing, how can Islamic financing products like Murabahah help to achieve this? Any possibilities of PPPs along these lines?
Abdalla Abdulkhalik
Wa Alaikum Salaam Haji, capacity building for SMEs is one way to support. For Gulf African Bank we do have SME hubs with specialised relationship managers who can give guidance in difference fields. This relationship management approach is followed by many banks.
Abdalla Abdulkhalik
Ezer my view on technology is that if you dont enhance your services with new technology you can be left out. Many banks are in the process of implementing digital banking that will enable them to support SMEs at a wider scale.
Najma Jabri
Hi Abdalla, congratulations for steering GAB to unprecedented growth. You have been an active champion of women empowerment, what is GAB doing on this front under its Annisaa program?
Abdalla Abdulkhalik
Even at Gulf African Bank we see the great opportunity of reaching SMEs even where we do not have a branch presence.
Ezer Kipkurui
How is islamic finance different from the mainstream finance? We would still end up paying ribah I believe?
Onesmus Mukewa
@Abdalla, Haha! unfortunately am not a Banker. I am a Core Banking engineer. Hire me!
Abdalla Abdulkhalik
Susan, shares can only be traded by investment banks; regarding the trading of shares in accordance with Shariah there are currently no institutions offering this service in Kenya.
David Kamuyu
Can the example given above on Real Estate Agreement, be reached upon in financing Agricultural based SMEs. Taking to account the grace period between sowing and harvesting.
Abdalla Abdulkhalik
Onesmus I see you! You can send your resume to HR@gab.co.ke and we will get in touch if an opportunity arises.
Doreen Mwihaki
Hi Abdalla, from the housing example....How does an Islamic bank then stay in business? do you have service charges?
Diane Meria
If housing finance charges no interest, how do you keep afloat?
Abdalla Abdulkhalik
William Im sorry to hear that. Please email atyourservice@gab.co.ke and I will follow up on this.
Kibet Seth
how secure is islamic banking in light of the recent turbulence in the banking sector?
Nadhir Mohamed
Assalam alaykum, Does GAB have any plans on launching an Islamic pension scheme?
Abdalla Abdulkhalik
Diane thank you for your point about the interest rates cap. We benchmark our profit rates against the Central Bank Rate.The problem that banks have with the interest rate caps is that it doesnt give us the room to price in the risk of the transaction.
Diane Meria
Thank you for your response, also I'd like to know how you manage to stay afloat without charging interest on loans?
Abdalla Abdulkhalik
Yes Kelvin, which is why for example we are hosting today's CEO Chat. If you would like to learn more, I invite you to visit the Gulf African Bank Web site to learn more.
Abdalla Abdulkhalik
Hi Patrick you may get in touch with our procurement department. You may call 0711075000 and ask for the Procurement Department.
Chat Admin
Ladies and Gentlemen, join me in thanking Abdalla Abdulkhalik for taking the time to join us and answer our questions on the topic of Islamic Finance for SME’s. It has been an engaging and informative time. Our time is now at an end and so on behalf of all at KBA and Gulf African Bank thank you for your participation and we look forward to joining you all next week for our second chat session of this quarter where we will discuss Start-up Capital Strategies with Samuel Kimani MD & CEO of Jamii Bora Bank. All that remains is to wish you a restful weekend and don’t forget to check out previous chat sessions on the archives page - http://chat.kba.co.ke/index.php?r=chat/archives
Onesmus Mukewa
@Abdalla, Thanks, will do that, though I have my own thing goin at the moment http://zoatech.com/. Thanks for the chat! Very insightful
Jared Osoro
Great Chat Abdalla!
Abdalla Abdulkhalik
Marisi thanks for your point...Indeed the interest rate caps are affecting how SMEs access bank finance.
Abdalla Abdulkhalik
The intent of the Banking Ammendment Act is good...the goal was to protect borrowers...but how the law was structured did not consider the elements that contribute to the price of credit. It is our wish that the Act be repealed and that the industry together with National Treasury and Central Bank work towards supporting Kenyans.
maina NJUGUNA
Thank you Mr. Abdalla for your time, it was quite an informative chat..... So much to learn about Islamic Banking....
Marisi Perminas
Thank you sir for your time and insightful thoughts
Eric Asuma
Thanks Abdalla, the session was very insightful. Brilliant participants
Kelvin Munyeki
Thanks so much for the insights..
obare wycliff
Thank you very much i have learnt a lot today.
Chat Admin
Mr. Abdalla will answer a few more of the previously asked questions before we wrap-up
Abdalla Abdulkhalik
Shukran Najma, we are supporting women to create equal opportunity.
Abdalla Abdulkhalik
Doreen in Islamic Finance there are no service charges.
Abdalla Abdulkhalik
David there is Islamic credit and also Insurance to support Agri businesses.
Abdalla Abdulkhalik
Nadhir we currently dont have a pension product.
Abdalla Abdulkhalik
Kibet, Diane ...Islamic banks make profit out of the partnership ventures and trade-based transactions.
Abdalla Abdulkhalik
I know this can be a technical area...I will make a short video for you to help explain more...Kenya Bankers will share the link with you.
Rayhab Gachango
Please ask them to also post the video here so that we can access it.
Abdalla Abdulkhalik
Fred the Government's four pillars are very good and housing is critical for our country. We will be happy to partner with Government institutions to realize this pillar.
Abdalla Abdulkhalik
Thank you all for taking the time to join us in this Chat. I hope you have found it beneficial. KBA will be sharing with you a short video that I will make to help explain this product further.
Stephanie Kimani
Thank you for your time Mr. Abdalla
Abdalla Abdulkhalik
Karibu sana Obare
Abdalla Abdulkhalik
Thanks Jared! Glad you are here!
Abdalla Abdulkhalik
Thank you Stephanie
Isa Abdulaziz
Afwan Mr Abdallah.We will be waiting for the video .
Abdalla Abdulkhalik
Thank you all. Have a great weekend.
Chat Admin
Ladies and Gentlemen, join me in thanking Abdalla Abdulkhalik for taking the time to join us and answer our questions on the topic of Islamic Finance for SME’s. It has been an engaging and informative time. Our time is now at an end and so on behalf of all at KBA and Gulf African Bank thank you for your participation and we look forward to joining you all next week for our second chat session of this quarter where we will discuss Start-up Capital Strategies with Samuel Kimani MD & CEO of Jamii Bora Bank. All that remains is to wish you a restful weekend and don’t forget to check out previous chat sessions on the archives page - http://chat.kba.co.ke/index.php?r=chat/archives
Chat Admin
We will be closing the chat room in the next 10 minutes. Thank you!
Nadhir Mohamed
Than you and God bless
Kibet Seth
Thanks Abdalla, looking to more sessions and learning more about Islamic banking.
Chat Admin
We are closing the chat room now. Please join us next Friday as we talk to Samuel Kimani, the CEO of Jamii Bora Bank. We will be discussing Start-up Capital Strategies! Have a lovely weekend!!!
Christopher Ojiambo
Why is it so difficult now to access loans with most of the banks