Business
Kenya’s market overhaul eyes Islamic finance framework
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.
Strategy
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 Board. 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 bills.
Copyright The Africa Report 2014
