Malawi’s Economy on the Rise: FDH Bank’s Islamic Banking Initiative Takes Center Stage
Key Business Points
- FDH Bank plc’s Salama banking, an Islamic banking solution, has seen a phenomenal response one year after its introduction, registering thousands of customers and billions of kwachas in transactions.
- The success of Salama banking highlights the need for more training and legal reforms to support the sector, ensuring that bank staff have relevant knowledge and that disputes can be resolved effectively.
- The introduction of Islamic banking in Malawi presents an opportunity for local banks to diversify their product offerings and for the government to create a conducive business environment for the private sector to expand its scope.
FDH Bank plc has described its Salama banking, or Islamic banking, experience as phenomenal one year after introducing the product on the market. The bank’s head of corporate banking, Kawawa Msapato, said the Islamic window has registered thousands of customers and transactions are in billions of kwachas. The bank has decided to extend the product nationwide, from just three branches in Limbe, Mangochi, and Lilongwe, to all its branches.
The introduction of Islamic banking in Malawi has been described as exciting by Chavah Advisory Committee for FDH Salama chairperson Sheikh Ibrahim Lethome. However, he highlighted the need for training of human resources to ensure that bank staff have relevant knowledge on Islamic banking. Lethome also emphasized the need for legal reforms to support the sector, including laws to resolve disputes within Islamic banking transactions.
The Chamber for Small and Medium Businesses Association executive secretary, James Chiutsi, said the Islamic banking window could not have come at a better time than now when the cost of capital is high. Reserve Bank of Malawi executive director for regulation, Patrick Mhango, said it is the government’s policy position to create a conducive business environment for the private sector to expand the scope of the country’s Islamic finance.
Muslim Association of Malawi general secretary, Sheikh Alhaj Twaibu Lawe, thanked FDH Bank plc for their partnership to introduce Islamic banking, saying it will help them access bank services in an Islamic way. Economic statistician Alick Nyasulu noted that aspects of Islamic banking are worth pursuing given the high cost of borrowing, but it is not as easy as it seems. Islamic banking is premised on two fundamental principles: sharing of profit and loss and the prohibition of the collection and payment of interest by lenders and investors.
In Africa, countries such as South Africa, Nigeria, Kenya, Senegal, Djibouti, Uganda, and Morocco have legal and regulatory frameworks and run Islamic finance products. A committee member of the FDH Islamic banking window, Dalmin Omar Idruss, said the product should not be attached to Islam as a religion, highlighting the potential for Islamic banking to be a viability option for Malawian businesses.
What are your thoughts on this business development? Share your insights and remember to follow us on Facebook and Twitter for the latest Malawi business news and opportunities. Visit us daily for comprehensive coverage of Malawi’s business landscape.
