VZCZCXRO8895
RR RUEHBC RUEHDA RUEHDBU RUEHDE RUEHGI RUEHKUK RUEHLH RUEHPW
DE RUEHDJ #0783/01 1860803
ZNR UUUUU ZZH
R 050803Z JUL 06
FM AMEMBASSY DJIBOUTI
TO RUEHC/SECSTATE WASHDC 7404
INFO RUCNISL/ISLAMIC COLLECTIVE
RUEHDS/AMEMBASSY ADDIS ABABA 3349
RUEHAE/AMEMBASSY ASMARA 2098
RUEHLO/AMEMBASSY LONDON 0605
RUEHNR/AMEMBASSY NAIROBI 2974
RUEHFR/AMEMBASSY PARIS 0851

UNCLAS SECTION 01 OF 02 DJIBOUTI 000783 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR AF AND AF/E 
LONDON, PARIS FOR AFRICA WATCHER 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EINV EFIN DJ
SUBJECT: A SURGE OF FOREIGN BANKS IN DJIBOUTI 
 
¶1. (U) SUMMARY. A branch of the Saba Islamic Bank (SIB) based 
in Yemen was inaugurated June 25, the first of three new 
banks to open its doors in Djibouti. The Central Bank of 
Djibouti has also approved establishment of the International 
Commercial Bank (ICB) of Malaysia and the International Bank 
of Yemen (IBY). Additional foreign banks have also begun the 
licensing process. The arrival of these new banks is expected 
to break the decade-long monopoly held by two existing French 
banks and boost the local economy. END SUMMARY 
 
¶2. (U) During the inauguration ceremony of the Saba Islamic 
Bank (SIB), CEO Hamid Al-Ahmar (said to be the son of the 
Speaker of the Yemeni Parliament) explained that the SIB 
opened its first branch abroad in Djibouti following a 
request made by the Djiboutian Government. Created in 1997, 
the SIB has a capital asset of USD 30 Million, and its 
shareholders include the Dubai Islamic Bank, the Islamic 
Institution of Private Sector (based in Jeddah), and Yemeni 
investors abroad and at home. The Djiboutian Branch is the 
first branch of SIB abroad and plans exist to open other 
branches in the near future. 
 
¶3. (U) In his speech, Al-Ahmar cited the stability and 
economic boom of Djibouti as the major reasons for the 
opening of the branch. He called upon Djiboutians to use the 
Islamic way of funding and contracting loans because it is 
more licit than western-style banks that charge interest, 
which is prohibited by Islam. Al-Ahmar assured the Djiboutian 
government that the SIB will boost the local economy and 
contribute to the financing of real estate and industrial 
expansion projects in Djibouti. The SIB also indicated that 
it is planning to offer competitive lending rates. 
 
------------------------------- 
International Commercial Bank 
------------------------------- 
 
¶4. (U) The Djiboutian Central Bank has also approved the 
establishment of the International Commercial Bank (ICB), 
owned by the former Malaysian Finance Minister Tum Daim 
Zaibuddin. The ICB has deposited a capital of USD 1.7 
Million, and Mr. Coreijelli Shivananda, a Malaysian national, 
has been appointed as ICB Director General. The ICB is 
renting a space close to the SIB and is planning to start is 
activities in August 2006. 
 
------------------------------- 
International Bank of Yemen 
------------------------------- 
 
¶5. (U) The International Bank of Yemen (IBY) has been granted 
temporary status, until it can provide the required deposit 
of USD 2.8 Million since the IBY reportedly intends to 
provide a wider array of services compared to the ICB or SIB. 
It is believed that the IBY has influential shareholders in 
Dubai, and a powerful Djiboutian shareholder, Abdourahman 
Mahmoud Boreh. 
 
------------------------------- 
Other Foreign Banks 
------------------------------- 
 
¶6. (U) According to Djiboutian Central Bank officials, there 
has been a sudden surge of foreign banks interested in 
Djibouti. Reportedly, representatives from foreign banks have 
consistently visited Djibouti in the last several months. 
These banks are mainly based in the Middle East, and include 
The Jordan-Kuwait Bank and The Persian Bank, a private bank 
from Iran. There is also a proposal to open a postal bank, 
which will offer its services to low-income customers who 
cannot afford to open accounts in existing commercial banks, 
due to the minimum account balance requirements these banks 
impose. 
 
------------------------------- 
Licensing Requirements 
------------------------------- 
 
¶7. (U) Each bank must apply for a temporary license and 
deposit USD 1.7 Million in a local bank, which is kept as a 
guarantee in case of bankruptcy. The temporary license is 
valid for one year, in which time the foreign bank muQ 
complete all administrative procedures and begin its business 
activities. Once the bank becomes fully operational, the 
 
DJIBOUTI 00000783  002 OF 002 
 
 
Djiboutian Central Bank issues a permanent license. 
 
¶8. (U) COMMENT. These foreign banks seem to be attracted by 
the opportunities that could result from Dubai-based 
investments in Djibouti's port and hotel industries. The 
presence of a U.S. military base and its use of port 
facilities could also increase the level of confidence in 
foreign investors. The upcoming COMESA Summit could also be a 
factor. An additional element is a banking regulatory 
framework favorable for financial investors. Djibouti already 
serves as a banking hub in the Horn of Africa, with customers 
from Somalia and Yemen. Many international organizations and 
embassies based in Ethiopia utilize Djiboutian banks due to 
fewer restrictions. 
 
¶9. The two existing French banks in Djibouti claim that these 
new foreign banks will not constitute a threat for them, 
having secured loyalty from their clients. In addition, the 
existing banks believe that the new foreign banks will 
probably face bankruptcy, as they did in the eighties. 
However, the French banks seem to ignore the fact that 
current political and economical conditions are much more 
favorable than in the eighties. These new banks are likely to 
have success if they simply offer better services and 
treatment than the French banks, which are less and less 
favored by Djiboutians. Moreover, the local population, 
predominantly Muslim, seems particularly interested in 
utilizing an Islamic bank. END COMMENT. 
RAGSDALE