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CMA differs with IMF on Kenya’s Islamic finance market

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The Capital Markets Authority (CMA) has differed with recent report by International Monetary Fund (IMF) which indicated that Kenya’s Islamic finance market lacks sound regulatory framework.
The capital markets regulator has instead defended the country’s efforts, saying all is being done to create favorable atmosphere for Islamic finance to thrive, contradicting reports made by the World Bank’s financial arm last week.
CMA in a statement, said that the latest developments which include adjustments by the national Treasury as well as the amendment of Capital Markets Act, coupled with other plans, will fasten the country’s pursuit in consolidating the industry that will have enough clout to challenge the dominance of conventional banks and influence the way Islamic finance deals are made.
Those developments include, the amendment to the Capital Markets Act to facilitate Sharia’h-complaint capital market products, amendment of the Income Tax Act to provide for equivalent tax treatment of Sharia’h-compliant products with conventional financial products, exemption from payment of Stamp Duty on transfer of title relating to Sukuk bonds arrangement to support Asset-Backed Securities transactions and amendment to the Public Finance Management Act to allow for Government investment in Sukuk.
CMA’s chief executive Paul Muthaura, last week praised the launch of Islamic Finance Project Management Office (PMO) by the National Treasury, which is expected to further boost the nascent industry.
The PMO is led by Islamic Finance Advisory & Assurance Services (IFAAS), an international consultancy firm specialized in Islamic finance, in collaboration with Simmons & Simmons – whose ultimate goal is to boost uptake of Islamic finance products.
The National Treasury also appointed members of the Islamic Finance Consultative Committee (IFCC) whose main objective shall be to provide support and feedback on the proposed Islamic Finance policies and regulatory changes to facilitate operations in this complementary form of finance.
The IFCC is a key governance committee that shall be next in line to the apex committee – the Islamic Finance Steering Committee (IFSC).

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The IFCC will refer issues requiring urgent resolution to the IFSC for expeditious guidance.
“The formal appointment of the IFCC is yet another positive development, as we firm-up the Islamic Finance advisory structures to prepare the ground for an Islamic Finance policy and regulatory framework in Kenya,” said Muthaura.
“The strategy to accelerate Islamic finance uptake is underpinned by the ambition to transform Kenya into an International Finance Centre as part of the implementation of the Capital Market Master Plan,” he said.
Kenya’s Islamic finance market has witnessed substantial growth over the last few years with several Islamic financial sector institutions in operation including; three fully fledged Islamic banks, five Islamic windows, two credit unions/Saccos, one Takaful company, one Retakaful window and one Capital Market Unit Trust Fund, as of June 2017.
According to the Islamic Financial Services Board’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.

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