The government is studying the Islamic finance model with a view to making the country competitive.
Central Bank of Kenya says this form of finance is fast catching up.
Governor Njuguna Ndung’u on Monday said that despite the financial crisis, Islamic finance had demonstrated strong growth with new business areas such as mutual funds and Takaful industry attracting a lot of attention.
Theoretically, Takaful is perceived as cooperative insurance, where members contribute a certain sum to a common pool.
The purpose is not for profits but to uphold the principle of bearing one another’s burden.
“We need to understand this business model that will support our relative comparative advantage in the East African Community region,” said Prof Ndung’u during a Gulf African Bank Annual East & Central Africa Islamic conference.
He said the two fully fledged banks - Gulf African Bank and First Community Bank - had 1,570 loan accounts and 58,548 deposit accounts and control 0.8 per cent of banking sector’s net assets with less than two years in operation.
“This is a solid testimony of the vast potential of Islamic finance in Kenya, which should be tapped and opportunities explored in the insurance (Takaful) and capital market segments using shariah compliant vehicles.
The two banks are taking part in shariah compliant components of infrastructure bonds issued by Central Bank for the government.
Prof Ndung’u said the bank was waiting for “structured sukuk” to cover the bonds and Treasury bills market.
Gulf African Bank chairman Suleiman Shahbal said the world was looking at Islamic finance as an alternative to conventional finance system after the global financial crisis.
The bank’s chief executive, Mr Najmul Hassan, said the bank was holding the second conference on Islamic banking following inquiries from Muslims and non-Muslims about Islamic finance.