Nairobi, April 29, 2014—Gulf African
Bank became the newest member of IFC’s Africa Micro, Small, and Medium
Enterprise Finance Program,
which works with banks in 18 African countries to increase lending to entrepreneurs.
Through the Program, IFC, a member of the World Bank Group, will provide
Gulf African Bank with advisory services to help the bank offer a greater
range of products to small and medium enterprises in Kenya, including many
owned by women.
To grow Gulf African Bank’s business
with SMEs, IFC and the bank will work on improving customer relationship
management, accessibility and speed of service. IFC
estimates that 39 percent of Kenya’s 134,000 formal small and medium enterprises
are owned by women. As in most developing countries, women in Kenya have
more difficulty gaining access to finance than men. Gulf
African Bank, the country’s first Islamic bank, is addressing the problem
through its Annisaa product,
a women-only transaction account. By providing dedicated tellers and banking
centers, as well as discounts at partner outlets; Annisaa reaches out to
women who may otherwise not have access to finance.
IFC’s new investment in
Gulf African Bank continues a relationship that began in 2013, when IFC
invested $ 5 million equity and extended a $ 3 million trade finance facility
to the bank. The investment marked
IFC’s first engagement with an Islamic finance institution in Sub-Saharan
Gulf African Bank CEO and Board Member,
Abdalla Abdulkhalik, said, “GAB and IFC will play a catalytic role
in providing shari’ah compliant finance in Sub-Saharan Africa. With the
expected introduction of a separate regulatory framework for Islamic Financial
Services, we expect increased investment from the GCC countries. Our
partnership will help fast-growing SMEs in a manner consistent with Kenya’s
vision 2030 development goals.”
Oumar Seydi, IFC Director for East and
Southern Africa, said, "Small and medium enterprises represent an
untapped market opportunity in developing countries. IFC works with capable
partners such as Gulf African Bank to increase financial services to entrepreneurs,
enabling them to grow and drive Kenya’s economy forward. Having invested
in Gulf African Bank twice, IFC is confident that Islamic finance products
will reach many businesses that would otherwise be excluded from banking.”
Since it was established in 2007, Gulf
African Bank has raised awareness in Kenya about Islamic banking. The bank
has fourteen branches in Kenya, offering a wide range of Shari’ah compliant
banking products and services.
IFC’s first Islamic finance transactions
were in 1995, supporting leasing in Pakistan. IFC has since approved investments
in 22 Islamic financing transactions to date for an aggregate amount of
US$707.3 million, supporting financial and real sector projects in MENA
and African countries. By investing in Islamic financial institutions;
IFC aims to support financial inclusion and increase access to finance
for entrepreneurs and individuals who may be outside the reach of conventional
IFC’s Africa Micro, Small, and Medium Enterprise
Finance Program is implemented in partnership with UKaid from the Department
for International Development.
FREQUENTLY ASKED QUESTIONS: ISLAMIC FINANCE
Islamic Finance, of sharia compliant financing, has been growing steadily
since the first modern Islamic banks were established about 40 years ago.
At the end of 2013, the assets of Islamic commercial banks reached
$1.8 trillion. By 2020, the value of Islamic financial assets is projected
to surpass the $4 trillion mark (afDB, 2012).
A key feature of global Islamic finance is the Sukuk market, which supports
private foreign direct investment flows, not only from investors in capital
surplus countries (such as the Gulf Cooperation Council) but also from
institutional investors in markets such as Malaysia, UK, the United States
and others. These investments are directed towards real assets and
project financing. Globally, Sukuk issuance amounted to US$119.7
billion in 2013.
IFC’s first Islamic finance transactions were in 1995, supporting leasing
in Pakistan. IFC has since approved investments in 22 Islamic financing
transactions to date for an aggregate amount of US$707.3 million, supporting
financial and real sector projects in MENA and African countries. By investing
in Islamic financial institutions; IFC aims to support financial inclusion
and increase access to finance for entrepreneurs and individuals who may
be outside the reach of conventional banking systems
IFC’s Islamic Finance Clients (Investment and Advisory Services)
Gulf African Bank, Kenya
Al Kuraimi Islamic Microfinance Bank
Al Rajahi Bank, Saudi Arabia
What is Islamic finance?
A core objective of Islamic finance is the economic empowerment of the
underprivileged and the community at large. Islamic financial institutions
promote inclusion and collaboration between parties with resources and
the less privileged members of society who would otherwise have no access
to finance. Islamic finance supports investment in productive economic
activity, requiring financial transactions to be linked to tangible assets.
Through sharing risks and rewards of financed assets or investments in
a business undertaking; Islamic finance follows a participatory model.
Islamic finance prescribes a socially responsible and ethical approach
to financial transactions, focusing on financing assets involved in trade,
commercial ventures and long term projects that are beneficial to society.
Islamic Banking in Practice
Islamic banks operate various types of transactions the most important
of which are:
Collection of Deposit:
Current account: The deposited capital is guaranteed and made available
to the client on demand. No reward is paid on the deposit but is mainly
used for transactions and safety keeping.
Investment account: Deposits remain with the bank for a certain previously
agreed period. Customers open investment account to yield financial return
based on trust financing. The depositor is the financing partner, while
the managing partner is the bank.
Murābahah contract: an agreement whereby
the institution offering Islamic financial services sells to a customer
a specified kind of asset that is already in their possession at cost plus
an agreed profit margin (selling price)
Mushārakah contract: an agreement
between the institution offering Islamic financial services and a customer
to contribute capital to an enterprise, whether existing or new, or to
own a real estate or moveable asset, either on a temporary or permanent
basis. Profits generated by that enterprise or real estate/asset are shared
in accordance with the terms of the
Mushārakah agreement, whilst losses are shared in proportion to each partner‟s
share of capital.
an agreement between the capital providerand a skilled entrepreneur
whereby the capital provider will contribute capital to an enterprise or
activity, which is to be managed by the entrepreneur as the Muḍārib.
Profits generated by that enterprise or activity are shared in accordance
with the terms of the Muḍārabah
agreement, whilst losses are to borne solely by the capital provider
unless the losses are due to the Muḍārib’s
misconduct, negligence or breach of contracted terms.
Ijārah leasing contract: an
agreement made by an institution offering Islamic financial services to
lease to a customer an asset specified by the customer for
an agreed period against specified instalments of lease rental. An Ijārah
contract commences with a promise to lease that is binding on the part
of the potential lessee prior to entering the Ijārah contract.
Bay'us-Salam Advance purchase contract is an agreement to purchase,
at a pre-determined price, a specified kind of commodity not available
with the seller, which is to be delivered on a specified future date in
a specified quantity and quality. The institution offering Islamic financial
services, as the buyer, makes full payment of the purchase price upon execution
of a Salam contract. The commodity may or may not be traded over the counter
or on an exchange.