Ethiopia is expected to have its first Islamic bank by the first half of next year when Zam Zam Bank, currently in its formation stage, will start operations.
Zam Zam Bank has been established but not operating since 2008 when the country's central bank, the National Bank of Ethiopia, amended the country's banking regulations to allow interest free banking. By August this year, officials of the bank, currently trading as Zam Zam Bank Share Company, said they had raised ETB330m ($19m), surpassing the initial target of ETB250m ($14.4m).
The chairman of the board of directors for Zam Zam Bank, Nasro Dino, could not be reached via telephone and email communication to his office was not replied to by the time of going to the press.
But an official of the bank, who declined to be named, told The Islamic Globe in a telephone interview from the bank's head offices in Bole, Addis Ababa, that the operations of the bank will be fully rolled out by the summer of 2012.
A presentation made to prospective investors indicates that the bank requires working capital of ETB250m ($14.6m), which will be kept in escrow until June 30, 2012. Ethiopian law, however, limits the ownership of interest-free banking institutions to locals, thereby shutting out potential foreign investors.
The new move to form an Islamic bank in Ethiopia is indicative of the huge appetite for Islamic banking in sub-Saharan Africa. "It shows the great potential for growth of Islamic finance in the continent. What the fledgling countries need now is to set up well informed Shari'ah advisory boards to ensure their financial products' adherence to Islamic law," Professor Hassan Nandwa, a Kenyan lecturer of Law and Shari'ah at Zanzibar University and the Catholic University in Nairobi said to The Islamic Globe.
He went on to say that in order to accommodate the fast growth of Islamic finance in the region; a number of scholars from several countries were working on a model that will see one Shari'ah advisory board serving several countries, to overcome the limited availability of local, African Shari'ah scholars.
Zam Zam Bank will offer interest-free personal and commercial loans, savings accounts, letters of credit, foreign exchange, money transfer and bank guarantees once it is open.
The bank is targeting the 33.9% of Ethiopians following Islam according to the 2007 national census.
© The Islamic Globe 2011
