Organisers of Hijra Bank opened public share sales in Addis Ababa on July 21, 2019, to build one of Ethiopia’s first interest-free banks with 1 billion birr ($35 million) in registered capital, Anadolu Agency reported.
The front of a 1998 Ethiopian one-birr banknote (Flosegura, Wikimedia Commons, CC0) [file photo]
Shares went on sale at nine banks from the next day, said Ahbabu Abdella, chairman of the organising team, at a launch at the Golf Club in Addis Ababa attended by organisers, banking experts, business people and religious leaders. He said the bank would start with paid-up capital of half a billion birr, and that public support, not the size of its capital, would decide whether it succeeded.
Interest-free banking, also called Islamic banking, follows Islamic rules that forbid charging or paying interest. Banks earn returns instead through partnerships, trade and leasing. Deputy chairman Mukemil Bedru said Hijra would engage in partnership finance, trade and the rent or lease of machinery, services that conventional Ethiopian banks had rarely offered.
Mukemil said there was substantial demand for interest-free banking in Ethiopia. He put the global industry at about $2.8 trillion, growing about 10 percent a year, and said Ethiopia’s banking sector had grown to about 800 billion birr from 15 billion birr ten years earlier.
In May 2019 Prime Minister Abiy Ahmed announced his government’s support for setting up full-fledged interest-free banks. Until then, Ethiopian lenders could offer such services only through interest-free windows inside conventional banks. Mufti Hajji Umer Idris of the Ethiopian Islamic Affairs Supreme Council also spoke at the launch.
Sources: Anadolu Agency