by Githua Kihara and Beatrice Gachenge

Gulf African Bank, the first fully Sharia compliant bank in Kenya, has launched a savings accounts for Muslim pilgrims.

The product called Hajj savings account targets faithful going to fulfil one of the pillars of the religion, a once in a lifetime visit to Mecca.

The Hajj investment scheme will grow through earnings from savings. This year's Hajj will take place in the first week of December.

Account holders will enjoy an array of benefits such as pre- travel information sessions, but they have to declare their pilgrimage intentions 45 days in advance.

The bank's head of liabilities and branch expansion, Walid Khalid, said account holders will also get special fares through Qatar Airways and a stop over in Doha, the airline's base.

"The partnership with Qatar will provide our clients with a convenient way to save and travel to Mecca," said Najmul Hassan, the chief executive officer, GAB. The airline operates five flights to Jeddah via Doha.

The banking sector in the country now recognises the need for products that cater for those who subscribe to the Islamic faith, with several conventional banks introducing Sharia compliant products. Mr Hassan said the bank would also introduce a women's (Annisaa) savings accounts and children's accounts.

The Sharia compliant banks are targeting six million members of the Muslim community in Kenya.

GAB plans to add to its five branches with a new outlet in Garissa in North Eastern province before October.

It plans to have 11 branches by the end of the year after opening one in Mombasa last week. Two more branches are planned for Mombasa.

The bank now has four branches in Nairobi. It is believed that Muslims have not opened accounts with and avoid financial arrangements with conventional banks for fear of going against the dictates of their religion which forbids charging of interest (usury).

"Residents will gain access to a partner who shares their values, integrity and transparency. The bank will provide extensive Sharia compliant and innovative products and services," bank chairman Suleiman Shahbal said during the opening of the Mombasa branch.

Mr Hassan said Sharia banking was based on the principles of ethics and fairness instead of undue enrichment at the expense of customers.

"By the end of 2009, we hope to have set up 25 fully operational branches in Kenya then we will extend our footprint to Tanzania, Uganda and Djibouti in the next five years" Mr Shahbal said.

Preparations for starting a business in Tanzania are already under way.

Huge potential
"Based on the few months' experience the bank has had in Kenya, there is a huge market potential that will steer this growth," he added.

Under the Sharia concept, banks work under the principle of sharing returns in a partnership.

When a customer deposits money in the bank for instance his contribution is an entitlement to share in the bank's profit.

Conversely when one seeks financial assistance from the bank, the bank first becomes an investor in the assets that one seeks to finance.

Despite the bank having products similar to those in conventional banking, the business is more inclined in dealing with goods (tangible items) rather than money.

For instance, the bank would buy the properties for its customers and sell the same at a small profit margin, Mr. Najmul said.

The GulfAfrican Bank is promoted by gulf based financial institutions along with prominent institutional and individual investors.