Kenya has the opportunity to become the hub for Islamic Finance in East and Central Africa, according to global law firm Hogan Lovells.
From the firms research,below are 3 simple ways on how Kenyan government can leverage on to boost its economic growth.
1.Develop Sharia Compliant Funds
Structuring and banking are likely to be an attraction for investors from Asia and the Middle East in Kenya, on the other hand Islamic banking and finance is based on profit and loss sharing, along with a religious prohibition in dealing in interest and transactions which are deemed too speculative in nature. These aspects of Islamic finance also invariably apply to the infrastructure of Islamic financial institutions – for example, Sharia compliant operational procedures, relating to the purchase and sale of assets as well as, usually, audits by a bank’s Sharia advisors.
2. Roll out guidelines on Sukuk bonds and Takaful Retirement Benefits Schemes
The introduction of these bonds and benefits will allow for the introduction and development of Sharia compliant products.
As highlighted during the budget reading 2017-2018 financial year by treasury Cabinet Secretary Henry Rotich, this roll out will help to attract foreign direct investment.
According to Imran Mufti, a partner at Hogan Lovells ,although the amendment of section 12 of the Banking Act formally introduced Islamic banking in Kenya, further regulatory changes are needed to ensure the Sharia compliance of the Islamic banks’ activities and increase the confidence in the industry.
3. Increase The chance of Accessing Islamic Finance
More than 30 percent of the Kenya’s population practices Islam. Inadequate access to funds is a major developmental constraint for Kenya and many SMEs and entrepreneurs remain outside the mainstream banking system. Islamic finance therefore has the potential to be a catalyst for financial inclusion across Kenya and become an important source of capital for small companies and individuals.