Egypt’s main agricultural bank is launching Islamic retail services this month to meet increasing demand in rural areas, a bank official told Reuters.
“We are launching sharia-compliant retail banking this month with a portfolio of 50 million pounds ($7.5 million) and can raise that to 100 million” next June based on demand, said Abdel Rahman al Kafrawi, head of Islamic transactions at Principal Bank for Development and Agricultural Credit (PBDAC).
Government-owned PBDAC will offer retail finance at 18 Islamic branches through murabaha and musharaka structures, he said. The bank has offered Islamic finance on a very small scale for several decades at 10 branches, and in 2012 won the central bank’s approval to raise the number to 24 branches.
Al Kafrawi said the new Islamic services would cover areas including purchases of durable goods and agricultural equipment, the setting up of clinics and medical laboratories, and the financing of education fees.
The bank has 1,210 branches across the country. Its chairman Muhsin al Batran told reporters last September that the bank would expand its Islamic services since a considerable proportion of farmers declined to take conventional loans because of Islam’s ban on interest.
Of 5.8 million farmers who owned land, only about a million had borrowed from the PBDAC, he said, adding that the bank aimed to raise this to 3 million by increasing Islamic finance and other services.
The share of Islamic business in the bank’s overall business is likely to remain tiny for the foreseeable future, however, as its total credit portfolio was 26 billion pounds in June.
Islamic finance is expected to grow in Egypt after the overthrow in 2011 of Hosni Mubarak, whose government neglected the industry for ideological reasons. Egypt’s new government, led by an Islamist president, aims to expand the industry.