Proposed establishment of a legal and regulatory framework for Islamic banking is likely to boost investment flows from Southeast Asia and Middle East, Gulf African Bank CEO Abdalla Abdulkhalik has said.
There was a significant international interest in Kenya’s Islamic banking, especially from Southeast Asia countries, but few deals have been cut due to non-existent legal and regulatory framework.
“There’s a lot interest for investment out of the Muslim countries, especially Southeast Asia countries such as Malaysia that would like to come to Kenya. They would, however, be more encouraged if they know that they can invest in a manner that conforms with their faith,” Mr Abdulkhalik said in an interview.
Kenya is keen to position herself as the hub for Sharia-compliant financial services in East and Central Africa.
There are three fully-fledged Islamic banks in the country – Gulf, First Community and Dubai Islamic Bank– with at least 11 conventional lenders with dedicated counters for such products.
The International Monetary Fund in June called on Kenya to come up with prudential guidelines for Islamic banking with a special focus on a deposit protection framework in light of rapid growth of the industry.
“The Banking Act itself has to include clauses to accommodate Islamic banking so that we have a level playing field with other banks,” Mr Abdulkhalik said. “But the central bank has been very supportive because we have never had any product that has been turned down.”
The government in October 2016 came up with Islamic Finance Project Management Office (PMO) to draft proposals on policy, tax, legal and regulatory framework for the fledgling industry.
PMO, made up of representatives from the five financial services sector regulators, was also tasked with coming up with reforms necessary to promote growth and development of Islamic financial services in the country.