The Central Bank of Kenya (CBK) has announced licensing of Dubai Islamic Bank (DIB) after the bank met stipulated requirements to operate in Kenya.
DIB is a unit of United Arab Emirates-based Dubai Islamic Banks.
This makes DIB the third shariah-compliant to be licensed in Kenya after Gulf African Bank Limited and First Community bank in 2007 and 2008 respectively.
The licensing, however, comes at a time when the regulator is yet to lift the moratorium it had implemented with regard to licensing of new banks.
CBK has, however, hinted that the licensing could be the first step to lifting the moratorium on licensing of new commercial banks. This we will have to wait and see.
According to CBK, the entry of DIB in the country will expand the offering in the Shariah-compliant banking niche and the general financial market.
DIB is the first UAE-based bank unit to be established in Kenya and this is seen as an important factor. One that is likely to strengthen economic ties between the two countries.
That’s not all:
Kenya is DIB’s first and preferred entry point into the Sub-Saharan Africa and this may indicate Kenya’s stature as an excellent financial hub.
About Dubai Islamic Bank
Dubai Islamic Bank is a subsidiary of the Dubai Islamic Bank PJSC (DIB PJSC) of the United Arab Emirates (UAE) founded in 1975. It has been ranked one of the largest Islamic Banks in the UAE.
As at 2016, DIB PJSC had an asset base of $47.6 billion and a capital of $7.4 billion.
The financial institution has a presence in Bosnia, Indonesia, Pakistan, Sudan, Turkey, and the UAE. Its entry into the Kenyan market is in line with its strategic focus to enhance its international focus.
What’s the general state of the local banking sector?
The decision to license Dubai Islamic Bank could be seen as CBK’s confidence in the stability of the local banking sector even though it has gone through some turbulent times in the past few years.
Banks have not been doing very well especially after the interest rates were readjusted. The capping of interest rates has affected both lenders and customers.
Bankers, IMF and a section of analyst have, however, warned that the interest capping will have a huge blow to the economy and that it is a disaster waiting to happen.
A report released by Sterling Capital Ltd suggested that while capping interest rates is a good gesture, it may end up hurting low-income earners. Banks have also complained that the measure would lock out thousands of borrowers.
Local banks have also undergone restructuring and this has led to massive job losses. Technology has taken over the banking sector and this has made some positions virtually redundant.
That’s a sad state of affairs but that’s not to say that Dubai Islamic Bank will not do well in the Kenyan market. There is a lot of room for growth in the financial sector and the newbie must have spotted a gap in the market.
We wish Dubai Islamic Bank the very best even as it seeks to establish its presence in the country.