NAIROBI, Kenya, Aug 12 – Even as the interest rates debate in the country heats up, did you know that Islamic Banking does not attract any interest?
Moreover, you do not have to be a Muslim to take up Islamic Banking.
The emergence and growth of the Islamic finance industry as phenomena has generated considerable interest and discussion in the financial world markets in recent years.
It is therefore not a coincidence that the same has generated attention and is a subject of discussion in Kenya.
According to a Senior Lecturer at the University of Nairobi School of Business Abdulatif Essajee, lack of information has inhibited the growth of the sector in Kenya
He projects to grow by 25 per cent in the coming years in Kenya.
Islamic Finance as we know it today has four segments, Takaful Insurance, Issuance of Islamic bonds (Sukuk), Islamic Banking, Micro Finance.
The fastest growing segment in the world is the Issuance of Islamic bonds (Sukuk). In Kenya, the fastest growing segment is Islamic banking.
The origin of Islamic Banking
The term Islamic Banking became common in the 1960’s, its origin, however, can be traced back to Prophet Muhammad himself way back 1400 years ago.
“Islamic Banking, as we know it today is a relatively new concept compared to established traditional or “conventional” banking business. In Kenya it has been around for over half a decade. It’s also known as Sharia’h Compliant Banking, Interest-free banking, Faith-based banking, Ethical banking, and Participatory banking (new kid on the block),” Essajee said.
Any financing deal has to be asset or service backed.
It uses the carrying on of banking business according to Islamic Law (Shariah).
Rules that Govern Islamic Banking
Any predetermined payment over and above the actual amount of principal loaned is prohibited.
The lender must share in the profits or losses arising out of the enterprise for which the money was lent.
Making money from money is prohibited.
Dealing in Prohibited (Haram) Items is not allowed that includes gambling and alcoholic beverages).
Sale of Al-Gharar (Uncertainty, Risks, and Speculation) is prohibited.