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 paved the way for the rise of Islamic finance in Kenya. Once Kenya approved the establishment of an Islamic bank, Uganda and Tanzania followed suit. How did it happen?
The late Daudi Mwiraria, Kibaki’s former finance minister, took us to see Kibaki and explain to him personally exactly what we wanted. Finance Minister Amos Kimunya and Stanley Murage, economic adviser to the president, were also present. I was accompanied by my partner Ahmed Bajaber. We were given half an hour to make our pitch.
Obviously, we were innovating. Islamic banking fell outside the scope of the Banking Act and was a new idea in Kenya. Regulators generally don’t like unconventional ideas and our Central Bank at the time was no different. Islamic banking also had political overtones that the previous regime did not endorse. To his critics, he also seemed to discriminate against non-Muslims.
Kibaki listened quietly and then started asking very technical questions. Why do Muslims need an Islamic bank? What is the problem with current conventional banks? I explained the Islamic prohibition of interest.
Then he asked if we wouldn’t charge interest and I said we wouldn’t. 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 which is like a meter that keeps running.
He then inquired how depositors are protected in an Islamic bank and ensured that they were indeed protected. Then he asked if this bank would be open to people of different faiths and we confirmed that it was. He was satisfied and agreed in his usual relaxed “hiyo si mbaya” style (not bad).
Our half hour was soon over and his secretary came to end the meeting, but Kibaki dismissed him saying, “This job is important for the economy. He instructed Kimunya to authorize the bank.
Kimunya then told the president that the move would take some time as they needed to change the banking law. Kibaki told him that it was not necessary and asked him to authorize Islamic banking as a new product. He wanted it to be approved in the supplementary finance bills. In short, he didn’t want this case to get complicated. This is how the Islamic bank was born.
He started discussing how licensing Islamic banking could help Kenya tap into Islamic development institutions. I was looking for a license and he was already looking at the big 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 was so busy with the 2007 campaign that he didn’t open the account. We had reserved the 001 account for him and since he did not come, the management gave me this account number. As I use my 001 account, I am constantly reminded that this was Kibaki’s greatest gift to Muslims.