CENTRAL BANK OF KENYA
Remarks
by
PROF. NJUGUNA NDUNG’U
GOVERNOR
33RRDD GGUULLFF AAFFRRIICCAANN BBAANNKK AANNNNUUAALL EEAASSTT && CCEENNTTRRAALL
Crowne Plaza Hotel, Nairobi
28th March, 2011
Mr. Suleiman Shahbal, Chairman, Gulf African Bank Ltd;

Mr. Najmul Hassan, Chief Executive Officer, Gulf African Bank
Ltd;
Board Members of Gulf African Bank Ltd here present;
Distinguished Guests;
Ladies and Gentlemen:
I. I am delighted and honoured to have been invited to preside over the
opening ceremony of this important conference. At the onset, let me
extend a warm welcome to all participants attending the 3rd Gulf
African Bank Annual East and Central Africa Islamic Finance
Conference, with the theme: ‘Islamic Finance: A Paradigm Shift
in Africa’
II. Allow me to compliment Gulf African Bank for organising this Islamic
Finance Conference. Indeed, this landmark conference brings together
financial experts, central bankers, financial regulators, lawyers,
financial institutions and Islamic banking consumers from Kenya and
beyond. To all international participants, let me extend a particularly
hearty welcome, ‘’Karibuni Kenya’’.
III. This conference gives participants the opportunity to discuss emerging
industry developments as well as reflect on the gains and challenges
since the last Islamic Finance Conference held in May last year.
IV. Ladies and Gentlemen: Sharia compliant banking is viewed by
many as the fastest growing segment of the banking sector in the world.
In Africa, Islamic banking is a fast growing financial sector attracting
all customers even of different religious orientation.
V. The uptake of Islamic banking is projected to grow exponentially in
sub-Saharan Africa. Kenya is among other African countries, that are
taking up the lead in Sharia compliant banking services.

VI. Today, Sharia compliant banking services in Kenya have made huge
strides since its introduction in 2007. The banking sector boasts of two
exclusively Sharia compliant banks. As at the financial year ended
December 31, 2010 the two banks collectively commanded a market
share of 0.9% of the banking sector with gross assets of Ksh.16.54bn,
net loans and advances of Ksh.9.23bn and deposits of Ksh.13.76bn. The
two banks had 58,101 deposit accounts and 2,609 loan accounts as at
the end of December 2010 – in less than 4 years of operation.
VII. In addition, several conventional banks now offer Sharia compliant
products as part of their product range through specifically created
Islamic banking divisions or windows. Other conventional banks have
also expressed interest in providing Sharia compliant products to an
increasing customer base.
VIII. Ladies and Gentlemen: Among the challenges facing Kenya’s
ambition to be a hub of Sharia compliant investment products to
compliment the Islamic banking in the country are lack of; Shariah
compliant investment vehicles, an enabling legal and regulatory
framework and awareness by majority of the populace that hinder the
uptake of these investments. For the country to fully embrace Islamic
Finance, there is need to extend beyond the offering of Sharia
compliant products by introducing such investment vehicles like unit
trusts, corporate bonds (sukuks) and insurance (takaful) products and
Sharia compliant treasury bills and bonds (government Sukuk).
IX. It is encouraging to note the ongoing efforts by the Government and
other players especially the Capital Markets Authority and Insurance
Regulatory Authority to come up with a range of shariah compliant
financial products. Already there are positive signals of these efforts
with the introduction of Shariah compliant investments and Insurance
Products.

X. It is in this spirit that the Kenyan government through the Finance Act
2010, amended Section 45 of the Central Bank of Kenya Act, to allow
the Central Bank as the Government’s fiscal agent to recognize the
payment of a ‘return’ rather than ‘interest’ on government securities.
This amendment opens up the spectrum of Sharia compliant
investments in the country.
XI. Ladies and Gentlemen: The future of Islamic finance in Kenya and
in the region remains bright. On its part, the Government of Kenya will
continue to pursue policies that create an enabling environment that
will eventually culminate in Kenya establishing itself as a regional
financial hub as envisaged in Vision 2030. In addition, the Central
Bank will continue to partner with the sector to promote financial
inclusion by supporting innovation in the Sharia compliant banking
sector.
XII. With these few remarks, let me wish all participants to this conference,
fruitful deliberations over the next two days and declare the 3rd Gulf
African Bank Annual East and Central African Islamic Conference
officially opened.
Thank You