The National Treasury is in the process of appointing a steering committee to oversee the establishment of a platform within the capital markets to accommodate Islamic financial products.
The plan is to be executed through the Capital Markets Authority Masterplan, which has been under preparation since 2011. This blueprint identifies Islamic finance as one of Kenya’s potential centres of excellence for leveraging the strength of the country’s financial sector to develop innovative products and services.
“However, to achieve this, a concerted programme of regulatory reform and recognition coupled with broader capacity building has to be undertaken so that Islamic financial services become a sector in their own right, capable of providing a broad spectrum of investment and allocation solutions,” said Paul Muthaura, the acting CEO of Capital Markets Authority (CMA).
He made these remarks yesterday during a round-table workshop organised by CMA in collaboration with Awal Consulting Ltd and The Islamic Research and Training Institute (IRTI), a member of the Islamic Development Bank as well as the Malaysia International Islamic Financial Centre (MIFC). The CMA Masterplan recommends a regulatory framework covering Islamic finance that focuses on corporate governance, disclosures, a policyholder compensation fund and responsible pricing.
This is to be borrowed from guidelines in other Islamic jurisdictions. And in the long-term developing a separate policy, legislative and regulatory framework for Islamic products and services that cover Islamic financial institutions, financial regulators, Islamic groups and the National Treasury that runs parallel with the conventional Act.
“In this long-term initiative, focus will be on putting in place an Islamic Standard Setting body, an association of Islamic Financial Institutions; and working with ICPAK and relevant international authorities to secure recognition,” said Muthaura.
Kenya currently has an Islamic Finance Country Index ( IFCI) score of 2.2 which is fairly low compared to Iran (the highest) at 73 and Malaysia at 46. In Africa the highest ranked is Sudan (14) and Egypt (6).
“In order to achieve better rankings, all industry stakeholders should work in concert towards achieving the specific criteria such as: number of institutions involved in Islamic finance, number of Shariah banks, Central Shariah supervisory regime, size of Islamic financial assets, size of Sukuk; education and culture as well as regulatory and policy regime,” said Muthaura.
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