Malawi’s fast-paced and forward-thinking financial institution, the trendsetting FDH Bank, is on the verge of making yet another history for being the first bank in Malawi to launch Islamic banking services.
Recently, FDH Bank made history for being the first ever commercial bank to establish banking services on Likoma Island.
The home-grown barrier-breaking financial services institution, FDH Bank, a subsidiary of FDH Holdings Group, are rolling out the Islamic banking services in direct response to global trends and interminable demand for the service in the country.
The increasing demand for Islamic banking products that has created a large opportunity for banks and lenders around the world has driven the FDH Bank to take heed to the call.
With 86% of millennial and Generation Z Muslims stressing the importance of ethical investments, banks now need to ensure they explore further ethical products and services to draw in more Muslim and ethical consumers closer.
Otherwise known as Islamic finance, Islamic banking, also referred to as Islamic finance, is premised on two fundamental principles of Islamic banking, which entails sharing of profit and loss and the prohibition of the collection and payment of interest by lenders and investors.
FDH Bank plc board chairperson Charity Mseka speaking during the launch of FDH Salama Banking Solution at Malawi Sun Hotel in Mangochi said: “Today marks a significant milestone as we gather to celebrate the launch of Islamic banking within our financial ecosystem, the first of its kind in Malawi.
“As FDH Bank Plc, we are proud to introduce what we have fondly coined as FDH Salama Banking Solution. Salama means peace and safety in Arabic. The Solution will comprise Shariah compliant products and services that will be managed separately through a special window from the conventional banking,” said Msaka.
She said the introduction of Islamic banking represents not just an expansion of services, but a commitment to inclusivity, diversity, and ethical finance.
Said Msaka: “This milestone comes on the back of our new purpose as a Bank which is to “provide easy access to financial solutions that enable our communities grow with us” and in anchored by our four pillars of our strategy namely Customer focus, Operational efficiency, People development and Innovation.”
Islamic banking, rooted in principles of Shariah law, offers a unique approach that emphasizes fairness, transparency, risk-sharing and operates without the concept of interest, which is prohibited in Islam, instead focusing on profit-sharing and asset-backed transactions.
In his remarks FDH Bank Managing Director Noel Mkulichi said it is a milestone for the bank to unveil the FDH Salama Banking Solution, the first Islamic banking services in Malawi by a commercial bank.
Said Mkulichi: “Today, it’s a culmination of outstanding efforts and great teamwork of various stakeholders.Certainly, the work to have Islamic Banking started a long time ago and there was a task force that was set up to engage and lobby the regulator Reserve Bank of Malawi to develop a regulatory framework for Islamic Banking in Malawi.”
Mkulichi thanked the Muslim Association of Malawi and Qadria Association of Malawi for championing this course.
“As FDH Bank we found fertile ground on which to launch the product because the hard work of creating a regulatory environment had already been done and we are also very grateful to the Reserve Bank of Malawi(RBM) for their unwavering support and guidance rendered in the course of this journey,” he said.
The FDH Bank Shariah Advisory Committee is headed by the Chairperson Sheikh Ibrahim Lethone Asman who is based in Kenya, Sheikh Asman, Sheikh Dr. Salmin Idruss Omar and Sheikh Safwaan Ahmed Ibrahim.
Mkuluchi added: “There is a certain part of people in the economy that wants this kind of financing and we would want to capture that and ensure we service them.
Mkulichi said under the window, the Malawi Stock Exchange-listed bank will not charge any interest on the products on offer, but instead there will be a sharing arrangement in terms of profits that will arise.
“This is going to run as a window separate from the conventional banking. Initially, what we intend to do is just offer one or two products and depending on the performance of those products then we will bring the rest of the products under the Islamic banking,” he explained.
Illovo Sugar Chief Executive Officer (CEO) Malawi Lekani Katandula said establishment of the Shariah banking services in the country will have a positive impact on the growth of the economy in country.
Elsewhere in Africa, South Africa, Nigeria, Kenya, Senegal, Djibouti, Uganda and Morocco have legal and regulatory frameworks and run Islamic finance products.
UK-based Malawian attorney and Shariah Law expert, Abdul Sherriff Kaunde said the Islamic Banking principles funds for safe-keeping are taken on al-Wadia contracts and do not earn any profit for the customers, whereas funds taken as investment by customers are on al-Mudaraba contracts and earns profit for the customers.”
Kaunde said Islamic banking is grounded in the tenets of the Islamic faith adding that they they relate to commercial transactions.
“The principles of Islamic banking are derived from the Quran, which is the central religious text of Islam and in Islamic banking, all transactions must comply with Shariah, the legal code of Islam,” said Kaunde.
Kaunde commended FDH Bank for launching the Sharia banking services saying it shows the bank has a heart for all Malawians and their needs.
“This a game changer for banking services in Malawi,” said Kaunde.
There are more than 560 banks and over 1,900 mutual funds around the world that comply with Islamic principles.
Between 2015 and 2021, Islamic financial assets grew to about $4 trillion from $2.17 trillion and are projected to rise to roughly $5.9 trillion by 2026, according to a 2022 report by the Islamic Corporation for the Development of Private Sector.
FDH Financial Holdings Group, a parent of FDH Bank is a diversified investment and financial solutions Group with interests in Banking, Discount House Operations, Investment Management and Advisory Services as well as Forex Bureau operations.
FDH Financial Holdings Group is headed by William Mpinganjira who alongside the management are steering the group to the Golan Heights.
FDH Financial Holdings Limited Group was established in November 2007 as part of the group restructuring to replace First Discount House Limited (FDH), as the holding company of the FDHFHL Group.
FDH was incorporated in accordance with the Companies Act on 8 March 2000 and commenced operations on 8 April 2002.
The company was established in 2000 through a partnership that included Dr. Thomson Mpinganjira, a revered local businessman and the first Managing Director of the Company, Press Corporation Limited, Old Mutual Life Assurance (Malawi) Limited and Kingdom Financial Holdings Limited of Zimbabwe.
“As FDH Bank we found fertile ground on which to launch the product.”
Noel Mkulichi
FDH Bank Plc Managing Director
