1.What is Islamic Banking?
Islamic banking refers to financial services that meet the requirements of the Sharia or Islamic law. While designed to meet the specific religious requirements of Muslim customers, Islamic banking is not restricted to Muslims. Also called Islamic finance or Islamic financial services, Islamic banking represents the practical application of modern Banking concepts within the overall development of Islamic Economics. The Sharia prohibits the payment of fees for the renting of money (Riba or Interest) for specific terms, as well as investing in businesses that provide goods or services considered contrary to its principles (Haraam) such as gambling, pornography, pork or alcohol. While Islamic Banking principles were used as the basis for a flourishing economy in earlier times, it is only in the late 20th century that a number of Islamic banks were formed to apply these same principles to modern day banking activities both within the Muslim and non-Muslim communities successfully.
2. What is the history of Islamic banking?
The history of Islamic banking and financial transactions can be summarized in two sections as follows:
Classical Islamic banking
During the Islamic Golden Age, early forms of proto-capitalism and free markets were present in the Caliphate, where an early market economy and an early form of mercantilism were developed between the 8th-12th centuries, which some refer to as "Islamic capitalism". A vigorous monetary economy was created on the basis of the expanding levels of circulation of a stable high-value currency (the dinar) and the integration of monetary areas that were previously independent. A number of innovative concepts and techniques were introduced in early Islamic banking, including bills of exchange, the first forms of partnership (mufawada) such as limited partnerships (mudaraba), and the earliest forms of capital (al-mal), capital accumulation (nama al-mal), cheques, promissory notes, trusts, startup companies, transactional accounts, loaning, ledgers and assignments. Organizational enterprises similar to corporations independent from the state also existed in the medieval Islamic world, while the agency institution was also introduced. Many of these early capitalist concepts were adopted and further advanced in medieval Europe from the 13th century onwards.
Modern Islamic banking
The first modern experiment with Islamic banking was undertaken in Egypt under cover without projecting an Islamic image—for fear of being seen as a manifestation of Islamic fundamentalism that was anathema to the political regime of the time. The pioneering effort, led by Ahmad Elnaggar, took the form of a savings bank based on profit-sharing in the Egyptian town of Mit Ghamr in 1963. This experiment lasted until 1967, by which time there were nine such banks in the country. In 1972, the Mit Ghamr Savings project became part of Nasr Social Bank which, till date, is still in business in Egypt. In 1975, the Islamic Development Bank was set-up in Jeddah Saudi Arabia with the mission to provide funding to projects in Muslim member countries. The first modern commercial Islamic bank, Dubai Islamic Bank, opened its doors in 1975. In the early years, the products offered were basic and strongly founded on conventional banking products, but in the last few years the industry is starting to see strong development in new products and services.
3. How is the Islamic Banking Industry evolving?
The Islamic banking industry today stands at several trillion dollars and consists of more than 500 financial institutions in and outside the Muslim world. Though Islamic banking is still a young industry, it continues to evolve and expand both financially and geographically. Additionally, it is not only an indigenous and community-focused industry: it caters to devout Muslims in indigenous Muslim societies as well as Muslim minorities of non-Muslim countries. Furthermore, it is an inclusive financial model: non-Muslim individuals and communities that seek ethical financial solutions have also been attracted to Islamic banking. For instance, it is said that when the first Islamic bank was established in the UK, the first person to open an account was a non-Muslim (Christian lady).
According to most financial analysts, Islamic banking is no longer a novelty sector. When a British banking group opened an Islamic banking window and began offering mortgages carefully formulated to meet Sharia practices in 2004, it was surprised that more than half of its customers were non-Muslim. What drew these customers to alternative financing that conforms to the strict dictates of Islam? Bank officials say that competitive pricing makes their Muslim-friendly mortgages - which operate more like leases than loans - competitive with traditional interest-based financing. It's all part of a trend in which financial products that comply with Sharia are evolving from a novelty into a normal part of doing business in much of the world. "Islamic banking isn't just for conservative Muslims. Its mainstream business now," say many financial analysts. No wonder every bank wants a piece of it.
This is an industry that is still evolving, developing and growing. It has gone from commercial banking to syndicated transactions and equities, and more recently to Investment Banking to undertake debt issuance, bonds and structured products. Its sophistication and product offering have developed along with this change. At an earlier stage, industry growth was in part a reflection of economic growth in the Islamic world, fuelled primarily by oil wealth. This created a growing middle-wealth segment and hence made banking a necessary service to the larger segment of the population. In the past several years, increased awareness about Islamic banking has led to conversion of a number of Conventional Banking Institutions to Islamic Banking and this fuelled further growth for the industry from conventional banking and continued high growth.
4. Which is the first Islamic bank to be approved in Kenya?
First Community Bank is the first Bank to be approved by the Central Bank of Kenya (CBK) under cap 488 of the Banking Act to operate as a full-fledged Sharia Compliant institution. The bank received its formal approval from the Central Bank of Kenya on May 29th 2007 thereby opening the door for Sharia Compliant banking not only in Kenya but indeed in the entire East and Central African region. The bank commenced official operations on 1st June 2008 after carefully laying all the groundwork.
5. What makes FCB different from other Islamic financial providers in Kenya?
First Community Bank is Kenya’s first fully-fledged Sharia compliant bank. We are not a "window" of a conventioanl "Ribawi" Bank and we are not also owned by "Ribawi" Bank(s). We make every effort to ensure that we do not compromise the principles of our faith. We pride ourselves as the true "Home of Sharia Compliant Banking in Kenya". Our Sharia compliance started with our Shareholders and the "Seed Capital" that was put together to start the Bank. We made sure that, all our shareholders are people and companies of high integrity and that they or their businesses are not involved in any Riba or non-Sharia compliant business activities.
6. Can a non-Muslim bank with FCB?
Certainly, Our customer base is truly reflective of the many mixed cultures and peoples of our country. We have become the bank of choice for many individuals and corporate companies that do not come from an Islamic background. In fact, almost one third of our current client base comprise of Kenyans of non-Muslim background.
7. Does FCB employ only Muslims?
No, we seek the right person for the job regardless of colour, creed, gender, ethnicity, religion, etc. We are committed to our country's equal opportunities policy and we strictly adhere to our country's labour laws.
8. What provisions do you have for customers who do not speak English or Swahili?
Our customers are largely Kenyans and since English is commonly spoken well in Kenya, all our printed material is in English. Also all our staff speak English. However, we do recognize that some of our customers will appreciate the opportunity to converse in their native languages. Hence, we do recruit, especially amongst our front office, staff members who speak different languages to attend to different clients of our bank. Additionally, in certain areas of the country, we produce literature in appropriate local vernacular.