Abdalla Abdulkhalik

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Theme | Credit Scores and Access to Credit
Topic | Islamic Financing Options
MONTH | February 2020

Discussion Focus Area:

  • Finance Options Available In Islamic Finance

  • Growth Prospects of Islamic Finance In Kenya

Overview:

Islamic finance was introduced in Kenya more than a decade ago following the introduction of Sharia-Compliant banking in the country. Since its inception the banking model has grown rapidly, making Kenya a leading regional market for Islamic banking. Various banks have entered the market, leveraging on investment opportunities presented by the financing option.

In recent years, Kenya has been ranked among 18 African countries that have the largest potential for growth of Islamic banking and debt securities(sukuk). Kenya is the only East African country that made it to top of the list, which included Egypt, Morocco, Senegal, Nigeria, and Sudan.

Since its debut in 2006, the demand for Shariah-Compliant products has grown so rapidly that banks providing the services have at times had challenges accommodating the huge pool of customers that comprises both Muslim and non-Muslim customers.

Currently, there are three fully fledged Islamic banks in Kenya. To keep pace with demand, some banks have set up an Islamic banking desk, a specialised operational entity.

According to the International Monetary Fund Country Report, the number of operators offering Islamic Banking products has increased, although the market share of industry assets remains small when compared to conventional banking.

The uptake of Shariah compliant financial products has previous been adversely affected by the absence of supportive legal and regulatory infrastructure, lack of skilled Islamic finance professionals, poor perception and low awareness.

Recognising the significant role Islamic Finance plays in enhancing financial inclusion, providing alternative sources of finance, the industry, in partnership with the Central Bank of Kenya and the Treasury are working on a national payments policy that includes Islamic payments.