By Claire Wanja
The Capital Markets Authority (CMA) has lauded government efforts to deepen Islamic Finance in Kenya, following the Presidential assent of the Finance Act 2017, confirming Kenya’s commitment to positioning itself as a regional Islamic Finance hub.
The Finance Act 2017 contains a raft of targeted measures designed to support the growth of Islamic Finance in Kenya.
The measures include; amendment to the Capital Markets Act to facilitate Shariah-complaint capital market products; amendment of the Income Tax Act to provide for equivalent tax treatment of Shariah-compliant products with conventional financial products; exemption from payment of Stamp Duty on transfer of title relating to Sukuk (the Shariah-compliant equivalent of conventional bonds) arrangement to support Asset-Backed Securities transactions; and amendment to the Public Finance Management Act to allow for Government investment in Sukuk.
The CMA Chief Executive, Mr. Paul Muthaura, observed that the recent policy decision comes eight months after the launch of the Islamic Finance Project Management Office (PMO) by the National Treasury.
The PMO is led by Islamic Finance Advisory & Assurance Services (IFAAS), an international consultancy firm specialized in Islamic finance, in collaboration with Simmons & Simmons – an international law firm. The ultimate goal is to open the way for increasing the uptake of Islamic finance products.
Meanwhile, The National Treasury has formally appointed members of the Islamic Finance Consultative Committee (IFCC).
The IFCC is an industry stakeholder committee whose main objective shall be to provide support and feedback on the proposed Islamic Finance policies and regulatory changes to facilitate operations in this complementary form of finance. The IFCC is a key governance committee that shall be next in line to the apex committee – the Islamic Finance Steering Committee (IFSC). The IFCC shall be the one to refer issues requiring urgent resolution to the IFSC for expeditious guidance.
Mr. Muthaura noted “the formal appointment of the IFCC is yet another positive development, as we firm-up the Islamic Finance advisory structures to prepare the ground for an Islamic Finance policy and regulatory framework in Kenya”.
Mr. Muthaura said, ”the strategy to accelerate Islamic finance uptake is underpinned by the ambition to transform Kenya into an International Finance Centre as part of the implementation of the Capital Market Master Plan, which is a Vision 20130 flagship project”.
The CMA Chief Executive indicated that Kenya’s Islamic finance market has witnessed substantial growth over the last few years with several Islamic financial sector institutions in operation including; three fully fledged Islamic banks, five Islamic windows, two credit unions/Saccos, one Takaful company, one Retakaful window and one Capital Market Unit Trust Fund, as of June 2017.
According to the Islamic Financial Services Board’s Islamic Financial Services Industry Stability Report 2016, the global Islamic financial services industry reached an overall total value of USD1.88 trillion in 2015, with expectations of market size growth to USD3.4 trillion by end of 2018, an 81 per cent growth.
Mr. Muthaura observed that based on Kenya’s Muslim population (which stands at about eleven per cent of the total population) combined with the non-Muslim population that may be keen on taking up Islamic Finance products far outstrips the two percent penetration of Islamic finance in the global economy, thus presenting the Islamic finance industry in Kenya significant potential that still remains largely untapped.