Islamic Banking Demystified

Over the last decade, the Islamic banking sector has witnessed a spur in growth owing to the growth of the Kenyan economy and the diverse needs and demands of its citizens who are in search of financial solutions that complement their values and way of life.

Islamic banking is often viewed as a complex banking and financial system, the reality is that this form of banking is rooted in Islamic law - Shari’ah which stands on the core values surrounding ; mutual risk and profit sharing, transparency and fairness. This article seeks to address the misconceptions around Islamic banking.?

Common Islamic Banking Myths

Q: Is Islamic banking & finance exclusively for Muslims?

Islamic banking and finance is open to individuals of all religions and is not exclusive to those of the Muslim faith. Additionally, Islamic banking and financial institutions such as Premier Bank Kenya promote diversity and encourage Kenyans of all faiths and creeds to experience the bank’s products and services which have multiple benefits such as risk and profit sharing which is a competitive feature that conventional banks may lack.?

Q: Are Islamic Banks & Financial Institutions Regulated by the Central Bank Of Kenya?

There has been misinformation in the past that Islamic banks and financial institutions are self regulated because they are not conventional banks. All financial and banking institutions on Kenyan soil are regulated by the Central Bank Of Kenya

Q: Do Islamic Banks & Financial Institutions offer loans?

Islamic Banking Institutions such as Premier Bank Kenya, do not offer loans, we offer financing. Financing is a process whereby the bank supports a customer by offering them equipment, machinery or finances to start or support their business. This is done through the risk and profit sharing model based on agreed terms and conditions between the individual and the bank. Financing at Premier Bank Kenya is issued to customers who have banked with us for at least 6 months and can be used to finance mortgages, trade, education and many other ventures. It’s important to note that Islamic banks will only grant financing to businesses that are halal and do not engage in haram (forbidden) businesses such as gambling, pork and alcohol.

The lack of public awareness on Islamic banking’s principles and guidelines can be attributed to the spread of inaccurate/false information which can limit potential customers from choosing an Islamic bank such as Premier Bank Kenya as their preferred financial services provider. We have taken up the initiative to educate the public on Islamic banking through our Social Media channels where we have began an #IslamicBanking101 campaign that debunks terminologies and practices that are native to Islamic Banking.

As a bank we aim to roll out community initiatives geared towards educating and sensitizing Kenyans on the benefits of Shari’ah banking through events such as workshops and webinars to interact with our customers and prospective customers as we equip them with financial literacy tips to secure their financial future.?

We hope that this article will simplify your understanding of Islamic banking and eventually prompt you to try out Premier Bank Kenya’s products and services.?