Interest Grows in Interest-Free Banking
By Mikias MerhatsidkÂ
Addis Ababa, Ethiopia – Feisel Abdi Guhad, a Kenyan businessman originally from Kebri Dehar in the Ethiopia Somali region, has returned back to his birthplace to invest in a slaughter house.
As co-founder and general manager of the Jijiga Export Slaughter House Plc, in Jijiga, he is eyeing up the opportunity to supply the Middle Eastern market with goat and sheep meat.
The veterinarian-turned-businessman is finalising the construction of the slaughter house, which will have the capacity to process 2,000 sheep and goats in an eight-hour period. Eighty percent of the 122 million Br project has been completed; the remaining 20pc involves the acquisition and installation of machinery, for which Feisel has been seeking a loan.
But Feisel is not looking for an ordinary loan, rather one that follows Islamic values. He deposits his money in an interest-free account and he wants his loan that way, too. Now he has Interest Free Banking (IFB) to resort to, although prior to that he had been considering selling shares to raise the finances.
Now, he is finding solutions with the Murabha service at the Commercial Bank of Ethiopiaâ€™s (CBE) recently opened IFB service window. The service offers a method to meet Feiselâ€™s requirement of a 35 million Br interest-free loan.
â€œThe bank will buy the machinery for us and we will pay it to the bank in the future, with a mark up as a profit for the bank,â€ Feisel said.
The CBE is one of the three banks currently providing IFB, along with the United Bank and Oromia International Bank. The National Bank of Ethiopiaâ€™s (NBE) directive that allows banks to offer interest-free banking services alongside their conventional operations came into play in October 2011, but IFB in Ethiopia only started in September 2013, when the Oromia International Bank (OIB) launched the service. The CBE joined the market at the end of October, followed by United, which began providing the service on May 1, 2014.
Read more at: Addis Tribune