The Capital Markets Authority (CMA) CEO Paul Muthaura said the move will pave way for the issuance of the first sharia-compliant sovereign bond with an estimated value of 500 million U.S. dollars.
Muthaura said the government has listed regulations aiming to create an international financial hub for sharia-compliant banking services in East Africa to serve as a regional hub for companies aiming to set up Islamic finance services.
“We have been able to identify the policy level practices and listed some of the measures that we need to take in the last financial budget because we plan to make Kenya a regional hub for Islamic finance,” Muthaura told reporters at an East African Islamic Economy Summit, which opened in Nairobi Tuesday.
Kenya planned to issue the first sovereign bond of 500 million dollars to be used to improve key infrastructure such as ports, roads and a major rail project which is seen as critical to efforts to improve the country’s trade logistics capacity and ease the barriers to trade, which raise cost of manufacturing.
“Everyone is waiting for the right environment to be created,” Muthaura told Xinhua, pointing out to the ongoing efforts by the government to list regulations that would enable the operation of Islamic banking.
Dubai Islamic Bank, the largest bank in the United Arab Emirates, is waiting for the issuance of a banking license although the Central Bank of Kenya has provisionally issued it with a license in principle.
Muthaura said the licensing of Islamic compliant financial service institutions was part of Kenya’s efforts to improve “participatory finance,” a form of interest-free lending, which adheres to asset-based finance and bonds such as Sukuk, the asset-based Islamic bonds.
“We want to allow all these Islamic banking principles to enable the flow of funds into our market to support economic growth,” Muthaura said.
Banking experts say Islamic finance represent an immense capacity for growth with assets currently valued at 1.3 trillion dollars and expected to double to 2.6 trillion in 2020.
Among the laws that Kenya expects to change are the Capital Markets Act, whose amendments have been placed on the Finance Bill, expected to be passed in Parliament before June this year.
The government also plans to make changes to its public finance bill to accommodate the sharia banking.
Originally published on www.coastweek.com