CMA Joins Islamic Financial Services Board as an Associate Member

As part of the drive to position Kenya as the premiere Islamic finance hub on the African continent, the Capital Markets Authority (CMA) Kenya has been admitted by the Council of the Islamic Financial Services Board (IFSB) as an associate member of the IFSB.

The IFSB, which is based in Kuala Lumpur, Malaysia, is the global standard setting body which promotes the development of a prudent and transparent Islamic financial services industry through introducing new, or adapting existing, international standards consistent with Shariah principles, and recommends them for adoption. To date, IFSB has issued 26 Standards, Guiding Principles and Technical Note for the Islamic financial services industry.

The decision to admit CMA Kenya was made at the 29th IFSB Council meeting held in Cairo, Egypt on December 14, 2016. Other supervisory authorities, one industry association and one financial institution were also admitted to the membership of the IFSB.

Speaking while confirming the development, the CMA Chief Executive, Mr Paul Muthaura, said of CMA’s membership in IFSB that ‘This admission is a key step towards the development of Kenya as an Islamic finance hub in the East African region, which is a critical component in the establishment of Nairobi as an International Financial Center’ .

This comes on the back of the launch of the Islamic Finance Project Management Office (PMO), which took place two months ago. The PMO is overseen by the National Treasury with the technical/financial assistance of Financial Sector Deepening Africa (FSDA), and under the mandate delegated to it by Kenya’s Financial Sector Regulators Forum (FSRF). The PMO is led by Islamic Finance Advisory & Assurance Services (IFAAS), an international consultancy firm specialized in Islamic finance, in collaboration with Simmons & Simmons – an international law firm.

Mr Muthaura observed that Vision 2030 identifies financial services as a priority sector expected to play a central role as a key facilitator in the achievement of the Vision. The economic pillar has, as one of its main strategies, the broadening of the product offering in the financial markets to both domestic and foreign investors. To help diversify the product portfolio, Kenya has for some time now been laying the foundation for making the country a financial services hub, with one of the focus areas being its emergence as an Islamic Financial Hub

Mr Muthaura disclosed that according to the IFSB’s Islamic Financial Services Industry Stability Report 2016, the global Islamic financial services industry reached an overall total value of USD1.88 trillion in 2015, with expectations of market size growth to USD3.4 trillion by end of 2018, an 81 per cent growth. In the first half of 2015, the global Sukuk (Islamic bonds) amount outstanding stood at USD291 billion, while Islamic funds’ assets figure was USD71.3 billion. During the 11 months to November 2015 the Takaful (insurance) sector was estimated to be USD23.2 billion, while the Islamic banking sector’s assets stood at USD1.5 trillion.

The CMA Chief Executive added that Kenya’s Islamic finance market has also witnessed substantial growth over the last few years with several financial sector institutions of Islamic orientation operating today, including two fully fledged Islamic banks and five Islamic windows, two credit unions/Saccos, one Takaful company, one Retakaful window and one Capital Market Unit Trust Fund, as of September 2016.

He observed that based on the global trends, the Islamic finance industry in Kenya remains largely untapped based on the significant real economy funding needs, particularly in the infrastructure space, that are well aligned to Islamic or alternative financing structures.

Mr Muthaura said, ‘As an aspiring Islamic finance hub, with the right facilitative environment, we have a real opportunity to attract investment and capital inflows both from Muslims and non-Muslims locally and internationally. Kenya is in a unique position and only needs to implement policies that will further facilitate Islamic Finance, for it to reap the benefits of such efforts’.

To date, the 188 members of the IFSB consist of 70 supervisory and regulatory authorities from the banking, capital markets and Islamic insurance (takāful) sectors from 57 jurisdictions, as well as eight international inter-governmental organisations, and 110 market players (financial institutions, professional firms and industry associations). The full list of the IFSB members is available on the IFSB website www.ifsb.org.

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