A firm dedicated to providing full-fledged Sharia-compliant insurance services is gearing up to offer equity to the public.

Promoted by individuals with a background in interest-free banking, "Amana Takaful" plans to float shares to the public in the coming weeks with a par value of 1,000 Br. A subscriber can buy a minimum of 10 shares, with a ceiling of 5,000 shares.

Promoters of the initiative began the process of establishing a financial institution with the National Bank of Ethiopia (NBE) eight months ago, aiming to raise 200 million Br in subscribed capital within a year. Half of this amount is anticipated to be paid up, according to Ahbabu Abdella, one of the promoters.

Attaining this goal would meet the central bank's minimum capital requirement of 75 million Br, and puts the firm on a footing with industry newcomers such as Zemen Insurance. Zemen has registered 81.5 million Br in paid-up capital, of the 114.6 million Br subscribed by its shareholders at the end of 2019/20.

A directive issued in June 2020 by the central bank, permitting insurance companies to provide a Shariah-compliant product as either a window or stand-alone service, has prompted promoters' ambitions to be the pioneering full-fledged takaful insurance firm. The requirements set out by the central bank for the establishment of insurance firms differ from those forming banks. Unlike new entrants in the banking industry, insurance firms are obliged to submit a feasibility study along with their application.

Amana Takaful has conducted its feasibility study hiring Explore More Consultants Plc, a consultancy firm based in Addis Abeba.

The study showed there is high demand for Sharia-compliant insurance services in the banking industry, which has seen the establishment of two full-fledged interest-free banks, as well as in the property insurance market, especially in rural areas where economic activities heavily rely on agriculture, according to Ahbabu. The study identified the insurance firm would be profitable within two years of operation.

The recent proliferation of financial services oriented towards communities adhering to the Islamic faith encourages Amana's promoters. Global and Awash insurance companies have already begun providing Sharia-compliant services, while two full-fledged interest-free banks (IFBs) are among the latest to join the industry.

Earlier this year, ZamZam Bank became the first such financial institution to open its doors with nearly 900 million Br in paid-up capital. It is operating with three branches. Hijra Bank followed, obtaining an operating license after having raised 700 million Br in paid-up capital. It is expected to begin services in the coming months. Sahay and Ramis, both interest-free banks, are in the process of formation.

Amana's promoters believe such a thriving market will translate to an opportunity in the financial space for the insurance firm.