NAIROBI (Xinhua) --
Kenya will put in place laws and regulations to
enable the licensing of the Islamic financial services by June.
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.