First sharia commercial bank in Sri Lankan

COLOMBO: Sri Lanka's Amana Bank on Friday said it will next week start the operations of the island nation's first sharia-compliant commercial bank with the opening of 14 branches across the country.

The bank in a statement said it from Monday will offer a range of products including trade and treasury services.

Over the last 10 years, Amana developed its insurance and investment divisions as it prepared to become a bank.

Analysts estimate the island nation's Islamic finance industry has the potential to become a $1.5 billion business, given appropriate tax and other laws approved by Sri Lankan government based on sharia, the Islamic legal system.

Muslims make up about 8 percent of Sri Lanka's 21 million people, but Islamic financial products are also popular among non-Muslims due to their interest-free nature.

Amana's insurance arm, Amana Takaful has already been listed on the island nation's stock exchange. In February, the bank's shareholding amounted to 3.4 billion Sri Lanka rupees ($31.1 million).

Bank Islam Malaysia Berhad accounts for 20 percent of Amana's strategic investments, while AB Bank, Bangladesh, has a stake of 15 percent and Saudi Arabia'a Islamic Development Bank has 10 percent.

Copyright Reuters, 2011