Standard Chartered has launched Islamic banking services in Kenya, the first foray of its “Saadiq” brand into Africa, and it will use Kenya as a testbed for expanding the brand across the continent, a bank executive told Reuters.
The move comes after Kenya proposed a separate regulatory framework for Islamic finance, part of a broader strategy designed to boost capital markets in east Africa’s biggest economy.
“Our experience and success in this market will certainly determine our future strategy for the rest of Africa,” said Wasim Saifi, the bank’s global head of Islamic consumer banking.
“I would expect the next two to three years to be focused on building the Kenya business before we evaluate other markets in east and west Africa.”
Standard Chartered will offer its full range of sharia-compliant products in a market currently served by two full-fledged Islamic banks and the Islamic windows of a handful of conventional banks.
The lender, which makes 90 percent of its profit in Asia, the Middle East and Africa, will use its existing 28-branch network in Kenya; selected locations in Nairobi and Mombasa will have dedicated Islamic windows, Saifi added.
Standard Chartered will roll out products covering current and savings accounts, mortgages and auto finance, as well as trade and term finance.
Islamic finance, which follows religious principles such as bans on interest payments, accounts for roughly 2 percent of total banking business in Kenya, where Muslims make up about 15 percent of the population of 40 million.
Standard Chartered, however, hopes to attract a broader client base.
“We are not looking to target market share from the 1.5 to 2 percent share that Islamic banking has today, but to target the 98 percent that currently is not with Islamic banking.”
The development of a specific regulatory framework for the industry would provide a platform for growth; this has been observed in countries such as Malaysia and Pakistan, Saifi said.
“Similarly in Kenya, as the industry develops, we will expect to see the regulatory framework also expand and refine to enable this development.”
Earlier this month, Standard Chartered said it expected income and profits to remain “challenged” in the first half of this year after the bank reported its first drop in annual profits for a decade.
Kenya is attracting interest from at least one other Islamic bank; Dubai Islamic Bank’s chief executive told Reuters this month that it planned to expand operations into Kenya.