Stockbroker Genghis Capital has launched its Sharia-compliant fund after getting regulatory approvals and a waiver allowing them to burst the foreign investment cap.
Genghis Capital is the first brokerage to venture into the business, and started selling the Iman Fund unit trusts after the Capital Markets Authority (CMA) go-ahead.
The Iman Fund will invest 30 per cent of proceeds offshore after it got a one-year waiver from the 10 per cent limit unit trusts can invest abroad.
The fund promoters said the CMA exemption is based on the novelty of Shariah-compliant products in the Kenyan markets which limits investment opportunities.
“We applied for an exemption for the startup phase because Shariah-compliant products are limited in the local market,” said Theresa Kaleja, Genghis Capital head of unit trusts.
The Iman Fund can invest up to 30 per cent of its portfolio in stocks listed on the Nairobi Securities Exchange (NSE), 60 per cent in unlisted securities and 30 per cent in offshore investments.
Dr Kaleja said Genghis Capital would for now invest up to the 30 per cent each for both offshore and NSE stocks but 40 per cent in unlisted securities.
The regulator’s decision to increase the percentage of what can be invested outside Kenya is also influenced by the limit of Sharia-compliant industries represented on the NSE.
Adnan Ganiwalla, the Genghis Capital unit trust consultant, said screening the 56 listed companies on the NSE leaves 20 possible options and a further look even reduces the number.
Shariah investment guidelines bar investing in commercial banks, alcohol, pork, defence, gambling, entertainment and retail firms whose alcohol sales exceed five per cent of total revenue.
This narrows down the list to utilities and construction industries.
After the one-year exemption Genghis Capital will have to apply for a renewal of the licence but Mr Ganiwalla said that Real Estate Investment Trusts (REITs) should be in place to offer an alternative.
Property is an area banks and insurance companies are also massively investing in as they seek to give investors a wider choice of home-grown Shariah compliant products.
Kenya Re recently launched Retakaful, an Islamic insurance arm that has invested Sh50 million.
Chief executive Jadiah Mwarania said at the time investing in this industry is a matter of when not if.
“Retakaful is a reality. As a growth strategy to serve customers in countries beyond Africa, we cannot ignore this business. In Kenya, the Muslim population is substantial and growing. We need to ensure that Retakaful capacity is available not just to the Kenyan reinsurers but in all our existing markets in Africa, Middle East and Asia,” said Mr Mwarania.
Genghis Capital, the investment arm of Chase Bank, joins First Community Bank which, through its investment banking arm FCB Capital, was licensed by the capital markets regulator to sell its unit trust in April 2012.