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Why the launch of Pesa Halal is timely

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By Abdalla Abdulkhalik

Last week’s launch of the ground breaking flagship product – Halal Pesa, a was a big milestone for the bank.

Halal which simply means ‘lawful’ is a revolutionary mobile money service that strives to offer GAB customers access to a formal micro-savings and investment solution which adheres to Islamic laws on earning halal profits.

Halal Pesa is a financial revolution whose reality is overdue owing to the growing customers’ needs and demands in the market today and hence the necessity.

Those demands have also been necessitated by the existence of COVID-19 distresses which has seen an increased desire to use mobile money transactions instead of cash by most of our customers and Kenyans generally in an effort to curb the virus’ spread.

According to the Communications Authority of Kenya, for instance, in the period October to December 2020, the total value of mobile money transfers almost doubled by 97 percent compared to the same period the previous year, to over Sh 4 trillion.

The most significant area of growth during the time was transactions between customers and businesses, which covers the purchase of goods and services and also customers transferring funds between their mobile money wallet and their bank accounts.

So far, such measures which were first proposed by the Central Bank of Kenya (CBK) in mid – March 2020, have successfully paid off, but have also offered monetary institutions such as ours, an opportunity to modify and remodel our products to effectively and efficiently meet our customers’ financial needs.

Indeed most banks have made tremendous strides in an attempt to satisfy their customers’ demands in a period that witnessed unprecedented shutdowns and movement restrictions – whose impacts are still taking a huge toll on people and the economy as well.

You all remember how lives were altered right before our eyes when the pandemic hit, triggering a severe macroeconomic shock leading to sharp decline in aggregate demand and supply including disruptions in global supply chain. Rising sovereign and corporate debts were also affected as a result.

In turn, Covid-19 effects heightened financial market vulnerabilities such as low prices of crude oil and other commodities were affected – some of which still linger today due to the ongoing Ukraine-Russia war.

But we are hopeful a decision to end the unfortunate conflict between the two nations by the world leaders, is reached at the earliest to end fragmentary tension and anxiety that has engulfed the world economy.

As we mark another milestone as a financial institution, allow me to take you back to where it all started.

The journey to pioneering Gulf African Bank (GAB) started in 2008, when the then small bank ranked position 25 by assets out of the 43 licensed banks in Kenya, announced plans to dive into the uncharted territories – the Islamic finance market – an unknown concept then.

Fourteen (14) years later, we are regarded as one of the best banks in the country today – boasting of sound and candid dealings and our business trajectory over the years is a clear testament that the Kenyan market is now ready for take-off in terms of Sharia’h compliant products.

In 2020 for instance, GAB was awarded the Best Bank in Product Marketing and Islamic Banking in Kenya by Think Business Banking Awards and we were also recognized as the Best SME Bank, Kenya 2021, Best Digital Banking Brand, Kenya 2021 & Best Bank in Islamic banking last year.

The recognition is a clear sign that we are in this business for the long haul and together with my resolute team and Board of Directors are willing to listen to your needs and we will seek to ensure we meet them.

The launch is one that we are projecting to further give us an edge over our rivals.

Halal Pesa, which has been made possible in partnership with other stakeholders including Safaricom, seeks to not only simplify how we interact with our customers, but also marks GAB’s aggressive campaign in ensuring that the unbanked community’s financial concerns are met.

We are one of the two licensed Shariah-compliant banks and we have seen over the years a growing interest in Islamic finance products from both the Islam and non-Muslim communities.

The concept caters for investors who want to follow Islamic rules on avoiding direct payment or earning of interest, which are viewed as usury under Islamic law, and as such not limited to only Muslim faithfuls.

It is a global trend where more and more African countries including Kenya have been changing their laws to accommodate Islamic finance in order to benefit from increased investment and trade flows from the Middle East.

Kenya is seen as one of key markets alongside South Africa, Nigeria, and Mauritius to have a considerable potential of becoming Islamic finance influence in the continent.

But despite the slow pace in developing the National Policy on Islamic Finance as well as lack of information on the same, the EAC super power is staring at a potential boom in the sub sector which we are ready to cash in on.

With Halal Pesa we will initially roll out the product to Muslim-dominated regions with Mombasa our Launchpad before rolling out to other regions including Northern Kenya and Nairobi with a special consideration in EastLeigh where most of our Nairobi customer base is drawn from.

Please allow me to also inform you that the product has passed all through all necessary regulatory approvals with a clean bill of health by the regulator, CBK.

Industry trends show that the local market has been positioning itself as a hub for Islamic finance, aiming to lead in the region of East Africa and across Middle Africa. We have also seen an impressive desire by authorities to adopt a sound regulatory framework to grow the sector with Islamic bonds or Sukuks being considered by the government as a viable financial vehicle to raise funds to develop the economy.

The global Islamic finance market is growing rapidly, because of the strong investments in the Halal Sectors, infrastructure, and Sukuk bonds, especially through electronic modes in all products and services.

Other reasons felt to be contributing to that growth are tax exemptions on infant Islamic banks and products with a strong regulatory system. Whilst Malaysia aims to consolidate its market leader position, for instance, Indonesia is beginning to reduce barriers to IF.

It is a trend we can only foresee happening in Africa and Kenya as well.

S&P forecast that the global Islamic finance industry will grow by 10-12% annually over the course of 2021 and 2022.

Other positive developments for the domestic economy include improving asset yields, rising crude prices, and the commencement of the African Continental Free Trade Area (AfCFTA) which offer tremendous opportunities for us.

In addition, payment system expansion and widespread adoption of innovations in solving customers’ needs will open up more opportunities in the financial services market. Within this environment, we will continue to strive to explore new growth frontiers in order to continue to enhance value creation for all our customers and stakeholders.

The Writer is the Chief Executive Officer of Gulf African Bank (GAB)

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