In less time than expected Oromia International Bank (OIB) has achieved their six month target of meeting the newly introduced interest-free (Islamic) banking (IFB).
It has mobilized over 300 million birr under IFB.
Since December 2013, the pioneer in Ethiopian interest free banking, OIB has mobilized a large amount of money.
Nuri Hussein Indhessa, acting director of the interest free banking department of OIB, told Capital that the bank has mobilized over 300 million birr since they introduced the new banking scheme. He said that this achievement occurred within two months, while it was targeted to be achieved within six months which will be by the end of June, 2014.
“We have over 4,000 customers that deposited in one of our Islamic banking programs called Amana, and that is way beyond our expectation,” Nuri said.
According to the department head, 46 branches of OIB are offering Islamic banking and soon others will join them bringing the total to 73 by the end of the year. OIB is providing internal training to all their staff about Islamic banking (IFB). “We have also external training, as we have recruited an international consultant that has a lot of experience with this,” he added.
According to the acting director, the board is familiar with IFB because it is has a Sharia advisory group that has three cleric members. They have established a separate ledger and financial reports, keeping all data divided, ensuring segregating of activities from their conventional banking.
The director further said that the bank is trying to be innovative.
“In general we have organized nine different workshops covering the entire country to create awareness about this unique type of banking”. Two of the workshops including one event conducted on Wednesday March 26 at Ghion Hotel were organized in Addis Ababa. By the end of the current fiscal year OIB plans to conduct 21 workshops regarding Islamic banking.
Currently, the bank is working on deposit mobilization and receiving loan requests, while the bank under the Islamic banking scheme has dispersed loans for the export sector without any profit.
“In the future we will start Muarabah deposit that will allow the depositors to earn profit, while currently the bank only implemented the Amanah (current) deposit, which will not have profit for the depositors” he said.
The bank officials stated that the bank has planned to facilitate loan and equity financing based on the rules of Islamic banking, which is totally different than the conventional banking scheme.
According to Abi Sano, President of OIB, the bank will commence financing in the coming fiscal year, but until then it will continue to receive proposals for equity financing.
In Ethiopia interest-free banking has never been practiced despite the fact that it is popular, not only in Islamic countries, but in many parts of the world. The state owned giant Commercial Bank of Ethiopia also practices Islamic banking.