Plans to launch the first Sharia compliant bond in Kenya is well on course and might be done before the beginning of the next financial year.
According to the Managing Director (MD) AQEEL Consulting Limited, Jaafar Abdulkadir, the Government and the Capital Market are looking at widening the scope by tapping into the Islamic financing space.
Treasury Cabinet Secretary (CS), Henry Rotich has given his commitment to the Sharia compliant financing dubbed ‘Sukuk’ in the process of making Nairobi a financial hub, explained Abdulkadir.
Speaking during the launch of the first Sharia compliant pension fund on Wednesday, Abdulkadir said that what was being done was the legal framework and they intended to roll out the product as soon as possible if not this year maybe before the beginning of the next financial year.
When you invest in a bond whether conventional or Islamic, the needs for funding are the same but what differentiates one from the other are the principals which they operate. The Islamic bond operates on well-defined Sharia based principles and one of them is that there should be no provision of interest where paying or receiving and secondly, you cannot put funds in projects which are considered none permissible or Haram in sharia terms, said Abdulkadir.
The other issue is that you need to have the highest possible disclosure on how the investments are managed. With all these ethical considerations in place and Sharia principles observed, the Sharia compliant bonds do have a very big command in most parts of the world in countries like Malaysia, United Arabs Emirates (UAE), Qatar and some parts of Africa like Nigeria and Senegal, he emphasized.
Abdulkadir said that the Kenyan Government should also tap into Sukuk bonds as an alternative source of financing other than running after the Eurobonds and other bonds that the government gets attracted to in order to get financing to meet the development needs.
The County Pension Fund (CPF) Financial Services CEO, Hosea Kili said that the Fund realized there was a growing demand for Sharia compliant pension products but limited choices for customers.
Kili said that the product is typically available to people of all faith but must be run under the supervision of Sharia scholars.
Unlike conventional pension funds, Sharia-compliant schemes are prohibited from the payment or receipt of interest typically referred to as ‘ribe’ under Islamic law, explained Kili.
Source: Kenya News Agency