Deepening financial inclusion through KCB Fursa Sukuk

Financial inclusion remains the focal point towards achieving Tanzania’s economic vision. The country is now implementing the third National Five-Year Development plan (2021/22-2025/26) aiming at realising competitiveness and industrialization for human development.

The Bank of Tanzania (BoT) together with partners has been working to ensure broader access and usage of financial services in Tanzania. This ambition seems to bear results as there is a considerable transition within the area.

Financial Inclusion in Tanzania grew to 65 per cent from 58 per cent in 2017. The plan was to reach 75 per cent by 2022 through the implementation of the Second National Financial Inclusion Framework (NFIF 2018-2022).

Different stakeholders within the financial sector have taken further steps to ensure many Tanzanians have access to formal financial services. This is done through offering customised financial services that are reliable and affordable, thanks to digital technology advancement.

KCB Bank has been at the forefront of supporting this ambition over the years. The bank has taken different deliberate measures to ensure it extends service delivery in the country by enhancing its branch network to 16 branches countrywide.

Also, the bank has invested heavily in accelerating digital operations and alternative delivery channels like Internet Banking, Mobile Applications, POS, and Agency Banking (Mobi) which offers more convenience to customers. This has been instrumental in increasing service penetration to Tanzanians.

Last year, KCB Bank marked another milestone in the history of the financial sector in Tanzania. Through its Islamic Window, KCB Sahl Banking was able to roll out the first Public Offered Islamic bond called ‘Fursa Sukuk’.

“Fursa Sukuk is the first Initial Public Offer Islamic bond in this market and it is an advantageous investment opportunity that is open for everyone,”

“Buying this bond offers an expected return of 8.75 per cent per year and the profit payment will be done four times in a year (every quarter). Anyone can buy Fursa Sukuk at a minimum rate of 500,000/-,” said Cosmas Kimario, The Acting Group Regional Business Director and KCB Bank Tanzania Managing Director.

KCB Bank is one of the biggest banks in East and Central Africa guaranteeing business continuity for its investors.

According to the KCB Head of Islamic Banking, Mr Amour Muro, the funds raised will be directed to finance businesses and services that are Shariah compliant through the KCB Islamic Banking Window and the profit generated will be distributed to the investors.

“The profit income from financing activities that will be collected by KCB Sahl Banking will be distributed to the investors as coupon payments through the Mudharaba contract.

The Mudharaba is a profit-sharing contractual arrangement between an investor (Rab al Maal) and a managing trustee (Mudarrib) whereby the bank is in charge of profit making within a certain period and thereafter the profit will be shared with investors at the agreed expected rate,” he said.

This was another step in deepening financial inclusion in the country as it provided a rare opportunity for investors who could not invest in conventional bonds that are interest based.

To prove that, the bond was oversubscribed by 10 per cent during its Initial Public Offering (IPO) attracting an investment value of 11bn/-against the initial target of 10bn/-.

This shows that Tanzanians are ready to invest but they need solutions that are in line with their priorities.

Fursa Sukuk is now listed on the Dar es Salaam Stock Exchange (DSE) which means it has opened more doors for investors who did not buy during the IPO. Besides, investors can now trade their shares under DSE something that gives them more flexibility and value to their investments.

The Chief Executive Officer for CMSA, CPA Nicodemus Mkama said the success of the bond is a result of a sound investment environment by the Tanzania government including the removal of withholding tax in company bonds.

“We call upon institutions and companies to utilise capital markets to raise funds to implement different development projects. This will foster the growth of the sector and the nation at large,” he said.

The DSE Acting Chief Executive Officer, Ms Mary Mniwasa said the bond will extend the product portfolio thus offering more flexibility to cover different groups in the country.

“This means products are increasing in the market. For a long time, we have had two products (stock and bond) but we never had bonds that are faith related,” she says.

The Bank is looking forward to introducing more alternative financial products that will help many Tanzanians to tap into formal financial services and investments.