Fate of Dubai Islamic Bank staff in limbo as CBK says won’t issue licence

The fate of dozens of Dubai Islamic Bank’s (DIB) new employees hangs in the balance after the Central Bank of Kenya (CBK)onfirmed it will not issue a licence until a moratorium on new banks is lifted.

UAE’s largest Islamic lender has hired Philip Ilako as chief executive and recruited over 30 employees to help it set up base in the country having been granted an approval “in principle” by the regulator early this year.

READ: Dubai Islamic Bank to crank up rivalry with Kenya branches

Mr Ilako previously worked as the chief executive of Middle East Bank where he still serves as a non-executive director. He has also worked with Citibank, KCB and CBA.

“The moratorium is on the licensing of new commercial banks, which will have to wait until further notice,” said Samson Burgei, CBK head of communication, when probed on the fate of DIB.

CBK suspended the licensing of new banks on November 17 saying it needed to strengthen oversight.

READ: CBK suspends licensing of commercial banks

The Business Daily found work going on at DIB’s proposed headquarters at Upper Hill, Nairobi, during a visit to seek an interview with Mr Ilako, who was said to be out of office.

DIB offices are in a building owned by the collapsed Imperial Bank.

The bank, which was put under receivership last month following discovery of a S8 billion fraud, moved its headquarters to give room to DIB leading to speculation of joint ownership, which might as well provide a pointer to the regulator’s action.

In an interview with Gulf Review, DIB’s group chief executive was quoted saying the lender would cede 30 per cent ownership in the Kenyan unit to local partners.

E-mails and phone calls to DIB headquarters in Dubai seeking clarification on the ownership, the way forward and the fate of the employees went unanswered by the time we went to press.

CBK too did not respond to queries on the relationship between DIB and Imperial Bank. CBK has been pushing Imperial Bank shareholders to inject capital into the fallen lender and reopen it, but its directors have been slow to do so.

“The moratorium follows recent developments in the banking sector — liquidation of Dubai Bank Ltd and the placement of Imperial Bank Ltd under receivership — which have highlighted the urgency of enhancing bank supervision,” said CBK in an e-mail response to the Business Daily.

The suspension does not affect mergers and acquisitions. DIB would have been the second international bank to set up a green field operation following the entry of Nigerian United Bank of Africa six years ago.

Shariah banking

The bank had its eyes trained on the nascent shariah banking driven by wealthy but unbanked Muslims. It has an asset base of about S.9 trillion, which is larger than Kenya’s S.65 trillion worth banking industry.

Lawyers, however, said CBK could fall foul of Section 47 of the Constitution on fair administration of justice after issuing DIP with an interim licence leading to massive investment.

The section states: “Every person has the right to administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair If a right or fundamental freedom of a person has been or is likely to be aersely affected by administrative action, the person has the right to be given written reasons for the action.”

Other lenders who have entered the Kenyan market have opted for acquisitions. These include Bank M of Tanzania which acquired a majority stake in Oriental, Nigeria’s Guaranty Bank that acquired Fina in 2013, and West African Ecobank which took over East Africa Building Society.

Others including India’s HDFC and Central Bank of India, Bank of China, Rabobank from the Netherlands, Bank of Kigali, Mauritius Commercial Bank, South Africa’s Nedbank and First Rand have set up representative offices.