| March 4
March 4 Kenya's financial regulator has proposed
a separate regulatory framework for Islamic financial
institutions as part of a broad ten-year strategy designed to
boost capital markets in east Africa's biggest economy.
A draft of the strategy was circulated early this year and
the plan is now in its final stages of preparation. It aims to
promote more sophisticated financial services in Kenya such as
asset management, venture capital, private placements and
"It will be launched in coming weeks," a spokesman for
Kenya's Capital Market Authority (CMA) told Reuters.
Sharia-compliant structures are seen as important to support
funding of Kenya's infrastructure projects, with the CMA dubbing
Islamic finance a "priority".
Most estimates put the number of Muslims in Kenya at only
about 15 percent of the population of 40 million. But Islamic
finance, which is also being developed by several other
sub-Saharan countries in Africa such as Nigeria, could help
Kenya attract investment from cash-rich Islamic funds in the
Gulf and southeast Asia.
Islamic finance, which follows religious principles such as
bans on interest and gambling, is currently offered by two
full-fledged Islamic lenders in Kenya - Gulf African Bank and
First Community Bank (FCB) - as well as the Islamic windows of
several conventional banks.
They will be joined this year by the country's first
retakaful (Islamic reinsurance) firm, as Kenya Reinsurance Corp
ventures into the sector, the CMA said in its draft plan.
Takaful Insurance of Africa, the first full-fledged takaful
company in the country, was launched in 2011.
The CMA has also approved Genghis Capital to operate an
Islamic collective investment scheme, joining FCB Capital; the
regulator has introduced rules allowing the creation of
sharia-compliant real estate investment trusts.
In the short term, the CMA plans to create a regulatory
framework of its own for Islamic capital markets, focusing on
corporate governance, information disclosure, a policyholder
compensation fund and responsible pricing.
In the long term, however, the CMA would engage the central
bank and national Treasury to develop a separate policy,
legislative and regulatory framework for Islamic finance.
"This is a long-term project, but this framework should
provide the legal basis for the Islamic finance sector by giving
explicit recognition for Islamic financial services in all
relevant financial sector legislation."
This would include creating and giving legal recognition to
a single national sharia advisory board to set rules and
policies for the entire industry, a centralised approach which
mirrors regulation in countries such as Malaysia and Oman.
The plan would also create an industry lobby group and work
with standard-setting bodies such as the Bahrain-based
Accounting and Auditing Organisation for Islamic Financial
Institutions and the Malaysia-based Islamic Financial Services
The CMA would seek help in developing Islamic finance from
industry hubs in Malaysia and London. It has existing agreements
with Malaysia's regulator and a working relationship with the
London Stock Exchange.
Last month, the central bank-owned Kenya School of Monetary
Studies started offering courses related to Islamic finance. The
central bank has been working with its Malaysian counterpart in
an effort to offer sharia-compliant instruments such as Treasury
(Additional reporting by Duncan Miriri in Nairobi; Editing by