25th Feb, 2016
NAIROBI, KENYA: National Treasury has set its eyes on Middle East to diversify Government’s sources of international funding. The move is part of the State’s efforts to reduce its domestic borrowing requirements, control interest rates and stabilize the shilling and exchange rate.
Late last month, Treasury CS Henry Rotich said Kenya is working on documentation that would see current banking laws amended to pave way for its first Islamic bond.
According to Treasury Cabinet Secretary Henry Rotich, the Islamic bond, also known as a Sukuk, would help tap into the country’s Muslim population that has limited access to formal Sharia-compliant banking.
The action by the government is seen as a move that would catalyze economy benefitting both the Islamic population and the nascent Islamic finance industry in Kenya.
Many investors from the Islamic faith in the country and around the world have not been able to participate in domestic borrowing efforts by Kenya’s Treasury and in such other bonds such as the Eurobond due to religious restrictions.
“A sizeable portion of Kenya and the world population profess the Islam faith and this move, therefore, further deepens their participation and financial inclusion,” said players in the industry.
They expects a spillover effect to benefit non-Muslim institutions and individuals with the interest sharing concept that results to less systemic risks in Shariah compliant financing already growing in popularity.
Government debut into Shariah Compliant financing will further attract development of technical capacity in the country resulting to growth of other instruments of Islamic finance.
National Bank had last week partnered with global events company Awal to bring to Nairobi the first International Islamic Finance Conference for Africa, an occasion which Kenya’s Treasury Cabinet Secretary Mr. Henry Rotich used to outline the government’s plans for the sukuk bond. The conference was attended by representatives of Islamic Finance institutions and delegates from the countries of the Gulf Cooperation Council.
Speaking during the first International Islamic Finance Conference for Africa, Treasury CS Henry Rotich said that Kenya had ambitions to become an Islamic finance hub. “Kenya is keen to issue a Sukuk bond as the government reviews other avenues to fund budget financing deficit,” he said.
Last year, the Sukuk market witnessed a debut issuance from four governments that are not part of the Organization for Islamic Cooperation (OIC). This includes the United Kingdom, Hong Kong, Luxembourg and South Africa. Kenya will be the second non-OIC country in Africa to make a debut in the Sukuk bonds market.
