South Africa’s Standard Bank Group has launched its first Islamic banking product in Tanzania and is awaiting regulatory approval to offer similar services in Nigeria, a senior executive said.
The sharia law-compliant savings and current accounts are aimed at attracting customers deterred by conventional banking which conflicted with their faith, said Terry Moodley, head of personal and business banking at Standard Bank.
“We have targeted these two countries initially. They have large customer base groups that would find sharia banking attractive. We are aware that 40 percent of Africa’s people are Muslims,” he told Reuters late on Tuesday.
Islamic finance caters for customers who want to avoid earning interest, which is viewed as usury under Islamic law. Islam also prohibits speculation and investment in non sharia-compliant industries.
Just about half of Tanzanians are Muslims, Moodley said.
About 80 percent of Tanzanians live in rural areas and 95 percent of that group remains without formal banking services, according to the finance ministry.
Moodley said the bank hoped to launch Sharia-compliant loan products in a few month’s time, once it had pooled enough funds from its savings product.
“If we require funding at the time that we wish to launch the lending products, and we don’t have sufficient liabilities from deposits that have come through Sharia itself, then we would look for alternative sources of sharia-compliant funding,” he said.
The bank’s Islamic banking window was, however, not planning to participate in government paper auctions yet.
Islamic banking operates on a small scale in a few sub-Saharan countries, such as Kenya, South Africa, Botswana and Nigeria. Industry participants say Malawi, Uganda and Zambia would be next. Each have minority Muslim populations.