Stockbrokerage firm Genghis Capital is set to launch the market’s second Shariah-compliant unit trust in February, raising stakes in the nascent market mainly tailored for Muslim investors.
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.
Genghis Capital’s Shariah compliant unit trust, dubbed Iman Fund, is part of a money markets, equity, diversified and bond unit trusts that the firm expects to launch next month.
Adnan Ganiwalla, the Genghis Capital unit trust consultant, said that there are many Kenyan investors who want to invest in “socially responsible ventures” but have had limited options since religious beliefs forbid most of what is on offer.
“The Muslim population in Kenya is 11 per cent and many are either investing in property or putting money in accounts that do not earn interest,” said Mr Ganiwalla. Islam forbids interest earnings which makes investments in such interest bearing bonds and savings accounts unviable.
The heating up of the property market, especially the top end, narrows investment opportunities in the real estate sector, he added.
Genghis Capital will use guidelines from Shariah compliant screening companies such as Ideal Ratings and the Dow Jones Islamic Market Index to select investment options for the Iman Fund. Chase Bank’s Islamic division, Chase Bank Iman’s Shariah board will regulate the fund to ensure it meets the set guidelines.
“They will meet every quarter and after every corporate action to see of if companies are Shariah complaint,” Mr Ganiwalla told the Business Daily.
Barred investments are companies such as insurers, non-Shariah compliant banks, companies producing alcohol, pork, defence, gambling, entertainment and retailers whose alcohol sales exceed five per cent of total revenue.
Companies left are further vetted on criteria such as the level of debt in their books.
These criteria leave only about 20 of the 56 listed companies on the Nairobi Securities Exchange (NSE) as potential investees, mostly in agriculture and energy, though finer details are expected to come out at the official launch.
The Iman Fund will also invest in equity, domestic and offshore investments. The offshore part will be invested in a fund that invests in other funds.
An investor will need at least Sh500 to invest in any of the funds. Mr Ganiwalla said the entry level is based on research that has shown that the will to invest is limited by the large sums most funds demand.
The NSE 20-Share Index gained 28.95 per cent in 2012, the second best performance in Africa after Egypt’s Case 30 which gained 50.8 per cent. Such gains are set to attract foreign investors who want double-digit returns such as those earned at the NSE last year.
“This new fund, which is a unit trust scheme, will help Kenya attract foreign portfolio investors as socially responsible investments is a growing business in both the USA and Europe,” said the then CMA chief executive Stella Kilonzo when licensing the market’s first Shariah compliant fund.