Kenya confident of leading East Africa after gov’t push for Islamic finance

Photo: Paul Muthaura, Chief Executive Officer, Capital Markets Authority giving a keynote address at the East Africa Islamic Economy Summit 2017

NAIROBI - In February last year delegates at the first East Africa Islamic Finance Summit in Nairobi said Kenya wasn’t doing anything to develop the industry. A year later East Africa’s biggest economy unveiled a raft of Islamic finance initiatives as it sets out to diversify its debt and investor portfolios.

“At that time (in February 2016) the government had established an Islamic finance project management office, but it hadn’t been publicised. On March 30 2017 when the budget was read, the policy statements clearly defined the official recognition of Islamic finance as a mode of finance,” said Farrukh Raza, Managing Director of UK-based Islamic Finance Advisory and Assurance Services (IFAAS) that has assisted the Kenyan government in designing the initiatives.

Following Kenya’s 2017/18 budget announcement, Reuters reported the Islamic finance initiatives included: 1) Amendments to the Public Finance Management Act to allow the government to issue sukuk; 2) Changes to stamp duty to make Islamic finance products tax neutral against interest-based transactions; 3) Exemptions to value added tax to allow returns from Islamic deposits to be eligible for deductions similar to conventional banking products and; 4) Amendments to cooperatives and savings societies.

A week after the initiatives were announced, Paul Muthaura, Chief Executive Officer of Kenya’s Capital Markets Authority, said at the East Africa Islamic Economy Summit, “We are currently working with the National Treasury as well as Parliament to make sure that any necessary refinement coming from further stakeholders consultations can be included in the amendments already in Parliament to make sure that a holistic bundle of laws can be passed as soon as possible.”