Kenya’s inaugural Shariah-compliant bond, Linzi Sukuk, has raised the targeted Sh3 billion after bids came in at Sh3.02 billion.
Sources familiar with the issuance have told this publication the Sukuk is earmarked for listing on the Nairobi Securities Exchange in what authorities hope will further widen the array of asset classes available.
The Business Daily has further established that the bulk of the investors who tapped into the opportunity did so through CPF Asset Managers and Liaison Asset Managers.
Linzi Finco Trust secured the Capital Market Authority’s (CMA's) approval to issue Kenya’s first Sukuk on September 20, 2023 and has been in the market since with a targeted issuance which means only specific investors were courted to tap into it.
A Sukuk is the Islamic equivalent of a conventional bond. Unlike conventional bonds where investors target interest, investors in a Sukuk are granted ownership of the asset underlying the debt instrument floated and the periodic return received will be pegged on the performance of the asset. Conventional bonds do not translate into ownership of an underlying asset.
Proceeds from the Sukuk are aimed at developing 3,069 institutional housing units as Linzi Finco Trust aligns itself with the government’s affordable housing agenda.
“This landmark Sukuk will contribute significantly to expanding the availability of affordable housing and positively impact the lives of many Kenyan citizens. This innovative financing mechanism is expected to attract both domestic and international investors seeking ethical and socially responsible investment options,” the CMA stated in its approval for the issuance in September 2023.
The Affordable Housing Act 2024 defines institutional housing as housing that is within reach in price for institutions such as universities, colleges, police, defence forces, government pool housing and prisons.
Part 8 of the First Schedule of the Affordable Housing Act 2024 provides that the Affordable Housing Board may approve private sector players for engagement with the government.
On April 30, 2024, the CMA hosted a workshop on Islamic finance in Kenya during which the National Treasury indicated plans for the adoption of a regulatory framework to guide the deepening and uptake of Islamic finance in the country.
“Islamic finance needs a regulatory framework to support the growth of the sector. The National Treasury is committed to support Islamic capital markets by setting up a team to come up with a road map to deepen Islamic capital markets in Kenya,” Treasury Principal Secretary, Dr Chris Kiptoo, said at the workshop.
