Islamic banks posted growth in their profits last year as the faith-based banking concept becomes entrenched in Kenya’s financial sector.
There are two fully-fledged Islamic banks — Gulf African Bank and First Community Bank — which were established in 2007 after the Banking Act was amended to bring the unbanked population into the fold. The pair was able to break even in a fairly short time — Gulf African in two years and First Community in three years.
Last year, Gulf African registered 154 per cent after-tax profit growth to Sh242 million for the year ended December 31 compared to Sh95 million registered in similar period in 2011.
The bank’s total operating income grew by 38 per cent from the Sh1.1 billion recorded in 2011 to Sh1.5 billion in 2012. The loan portfolio grew by 27 per cent to close at Sh9.4 billion in December 2012 from Sh7.4 billion in 2011.
Return on equity increased from 7.2 per cent in 2011 to 15.5 per cent in 2012 while return on assets rose to 1.8 per cent compared to 0.7 per cent in 2011.
The bank has invited the International Finance Corporation, which has taken up 15.2 per cent shareholding, in its bid to raise its capital to meet its expansion plans.
“The shareholders of the bank have always believed in a well-capitalised institution which is sufficiently funded for future expansion. In line with this approach, a revised shareholders’ agreement was signed on February 28, 2013, which will see International Finance Corporation take a 15.2 per cent equity share in the bank.
This, along with additional capital injections by several existing shareholders, will increase the bank’s core Tier 1 capital by Sh854 million,” said managing director Asad Ahmed.
Gulf African Bank shareholders include Istithmar World (the investment arm of the Government of Dubai), Bank Muscat International (a leading bank headquartered in Bahrain), Sheikh Abdullah Mohammed Al Romaizan (a leading Saudi investor), PTA Bank, GulfCap (UAE), and Kenyans.
First Community Bank, on its part, recorded 239 per cent growth in profit-after-tax to Sh241.3 million last year ending December 31 from Sh71.3 million in 2011. The bank’s operating income grew to Sh645.6 million from Sh458 million and shareholder funds increased to Sh1.077 billion from Sh836.5 million. The operating expenses increased to Sh853.7 million from Sh734.2 million.
According to the Central Bank, by December 31, 2010, the two Islamic finance banks collectively commanded 0.9 per cent of the banking sector net loans and advances of $115 million (Sh9.7 billion) and deposits of $171 million (14.5 billion). The two had 58,101 deposit accounts and 2,609 loan accounts in the period.