Islamic bank set to launch in Kenya

A consortium of investors including a Bank Muscat unit and Dubai government investment agency Istithmar will open an Islamic bank in Kenya this April, the bank's chairman said.

Bank Muscat International (BMI), which plans to sell a 40% stake in an initial public offering this year, will own 20% of Gulf African Bank, Abdul-Malik al-Khalili told Reuters in Dubai on Tuesday.

Other shareholders in the bank, which Khalili termed as Kenya's first sharia-compliant lender, include Istithmar, which will hold 30%, and International Finance Corp., which has taken a 10% stake, said Khalili, chairman of both Bank Muscat and BMI.

Sharia, or Islamic law, bans receiving interest, which the religion equates with usury. A basic principle of Islamic banking is the sharing of profit and loss, as well as safekeeping and joint venture.

Saudi investors and the Free Trade Area bank are also shareholders, Khalili said.

Gulf African will start with $25 million in capital and could expand to other African countries, where Islamic finance is still underdeveloped, he said.

Around 26% of Kenya's population is Muslim but there is a dearth of banking services that comply with sharia, he said. "Africa is an attractive emerging market for growth of Islamic finance. There is a lot of liquidity in the Gulf and we are making a bridge between the two," Khalili said.

Kuwait's Al Madina for Finance and Investment Co. said in September it would set up an Islamic bank in Kenya with other investors, which it did not name.

It called Kenya the gateway to East Africa and Central Africa.

Bank Muscat, Oman's largest lender by market value, owns 49% of BMI, with Kuwait's Global Investment House, Istithmar, the government of Oman and Bahrain's Premium Group holding the rest.

Istithmar, fully owned by the Dubai government, paid $1 billion for a 2.7% stake in London-based Standard Chartered in October.

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