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National Bank of Kenya has lauded a move by the government to tap into Sharia’h compliant financing instruments following the announcement of plans to launch the first ever sukuk bond in the country.
Managing Director Munir Sheikh Ahmed termed the announcement a “historic feat that will further catalyze economy” saying that both the Islamic population and the nascent Islamic finance industry in Kenya would tremendously benefit from the state action.
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,” the MD said.
Munir expects a spillover effect to benefit non-Muslim institutions and individuals with the interest sharing concept that results to less systemic risks in Sharia’h compliant financing already growing in popularity.
Government debut into Sharia’h 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 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.
Rotich told delegates at the conference 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.
In 2015, 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.
Musa Adan, the director in charge of the National Amanah division at National Bank said the prospects of a sukuk bond in 2016 had made the year an exciting one already for Islamic banking.
“Kenyans do not have to be Muslims to participate or benefit from Islamic Finance. At NBK, we are increasingly seeing non-Muslims take advantage of our Sharia’h complaint products for their benefit,” he said.