Kenya is losing a chance to become a regional leader in Islamic finance due to lack of Islamic finance legislation, International law firm Hogan Lovell has said.
“When a country doesn’t have Islamic finance legislation like Kenya, changes that combine Islamic finance laws with Kenyan banking laws need to be made,” a statement from the law firm said.
It further pointed out factors such as the country’s growing economy and well-developed legal systems place a further demand for Kenya to become a regional lead for Islamic financing products and services.
“The Islamic finance market is rapidly expanding to meet a growing global appetite for ethical financing solutions. Financial institutions face the challenge of developing innovative products whilst tackling new regulation and adhering to guiding Sharia principles. Kenya has great potential to become the region’s leader in Islamic finance,” Global Head of Islamic Finance at Hogan Lovells Rohail Ali said.
He noted that the demand for sharia compliant financing is growing rapidly and Kenya is well poised to leverage on its development.
Other proposals made by the firm in bid to boost the sector include educating the public on the difference between conventional banking and Islamic finance solutions and the benefits for consumers. This is in addition to boosting human capital to move Islamic finance forward.
Earlier this year, Kenya offered Islamic financiers an exemption from paying stamp duty in an effort to raise alternative sources of funding for long term projects.
In addition, the President signed into law the Finance Bill 2017 which paves the way for the first Islamic bond in East Africa, signaling appetite for sharia compliant financing options at a national level.
Proposed changes to several Acts such as the public finance management Act will make it easier for the Treasury and counties to access Islamic financing as well as allow financial institutions deal in Islamic products.
This changes include opening up opportunities for the country to issue its first sovereign sukuk, corporate financing, including cross-border transactions and more.
There is also an opportunity to structure capital markets to enhance capacity for Sharia compliant products in the country.