First Community opens Islamic investment banking subsidiary
Posted Wednesday, March 7 2012 at 20:40
First Community Bank on Wednesday launched Kenya’s first fully-fledged Sharia-compliant investment bank— FCB Capital.
This came as the capital markets regulator announced plans to set up an Islamic financial products advisory body.
FCB Capital, a wholly-owned subsidiary of First Community Bank, will enter collective investment schemes (CIV) industry through the First Ethical Opportunities Fund.
The fund has been approved by the Capital Markets Authority (CMA).
FCB Capital becomes the first intermediary to tap into CIVs that target Islamic capital markets.
CMA chief executive Stella Kilonzo said Islamic finance holds huge potential, adding: “As an Authority we are keen to promote new capital markets products which will help us to expand into growth areas such as Islamic capital market products.”
CMA said it has been working with stakeholders on market education, tax harmonisation and formulation of policy and legal frameworks.
But Kenya lacks a central sharia advisory board which would oversee uniform application of Islamic law.
Mrs Kilonzo, however, said the regulator was consulting with other stakeholders over the setting up of the National Shariah Advisory Board . Each Islamic financial product currently relies on the advisory board of the issuer.
Ahmed Bulle, an audit manager at a local firm, said without standardisation there was fear that an investor could buy a product that is not sharia-compliant. This is blocking local issuers’ access to a pool of potential buyers.
A National Shariah Advisory Board would ensure uniformity and a single board for the religous-based firms, enabling them to go into mainstream business such as transaction advisory services but with an advantage over competitors.
“There are many top companies who would not want their valuations done by transactions advisors who are not Sharia-compliant because of the conservative nature of their businesses,” said Mr Bulle.
He said most of these companies are liquid and that this would be an opportunity for Sharia-compliant consultants to offer sory services on listing and issuing of bonds (sukuk).
At a banking forum in July last year, London-based firm King and Spalding, said by introducing Shariah-complaint bonds, issuers could have access to $1 trillion dollars— courtesy of higher-than-budgeted oil prices of the time.
Rizwan Kanji, a partner at the firm at the time said all the excess liquidity was only accessible to firms selling dharia-compliant products.