President Mwai Kibaki is the father of Islamic Banking in Kenya and Muslims owe him a huge debt of gratitude. He licensed our first Islamic bank in 2007 and opened the way for Islamic finance to flourish in Kenya. Once Kenya approved the establishment of an Islamic bank, Uganda and Tanzania followed suit. How did that happen?
The late Daudi Mwiraria, Kibaki’s former Minister of Finance, took us to see Kibaki and to personally explain to him exactly what we wanted. The Minister of Finance Amos Kimunya and Stanley Murage, the President’s Economic Advisor, were also present. I was accompanied by my partner Ahmed Bajaber. We were given half an hour to make our pitch.
Clearly, we were breaking new ground. Islamic Banking did not fall under the purview of the Banking Act and was a new idea in Kenya. Regulators generally do not like unconventional ideas and our Central Bank at that time was not different. Islamic Banking also had political undertones that the previous regime had not approved of. To its detractors, it also appeared to discriminate against non-Muslims.
Kibaki listened quietly and then started asking very technical questions. Why do Muslims need an Islamic Bank? What’s wrong with the current conventional banks? I explained the Islamic prohibition on interest.
Then he asked whether we would not be charging interest and I said we would not. How does a bank make money if it doesn’t charge interest? I explained that the bank charges a “profit rate” which is fixed and does not increase over time unlike an interest rate charge that is like a meter that keeps on running.
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He then sought to know how depositors are protected in an Islamic Bank and was satisfied that they were indeed protected. Then he asked whether this bank would be open to people of different faiths and we confirmed that this was the case. He was satisfied and gave his consent in his usual laid-back style “hiyo si mbaya” (this is not bad).
Our half hour was soon finished, and his secretary came in to end the meeting but Kibaki dismissed him saying, “this work is important for the economy. He instructed Kimunya to licence the bank.
Kimunya then told the President that the move would take some time as they needed to amend the Banking Act. Kibaki told him that that was not necessary and instructed him to licence Islamic Banking as a new product. He wanted it approved in the Supplementary Finance Bills. In short, he did not want this matter complicated. That is how Islamic Banking came to be.
He started discussing how the licensing of Islamic Banking could help Kenya tap into Islamic development institutions. I was looking for a licence and he was already looking at the bigger picture. No wonder Kenya grew so fast under his government.
He was a man of few words and decisive action. My only regret is that he promised to open an account with us but then got so busy with the 2007 campaign that he did not open the account. We had reserved account 001 for him and since he didn’t come, the management gave me that account number. As I operate my account 001, I am constantly reminded that this was Kibaki’s greatest gift to the Muslims.