Sharia-compliant finance grows in Kenya

Finance compatible with Islamic investment principles is taking further root in Kenya. There has been take up of sukuk portions of infrastructure bonds launched by the Government, the Central Bank of Kenya (CBK – has announced that it is working on plans to launch sharia-compliant treasury bills in the money market and it is reported in local media that a sharia-compliant unit trust is applying for registration.
According to the bank, including sukuk bonds and bills (structured in compliance with sharia law), is likely to increase the amount of cash flowing into Kenya from the Gulf region. CBK Governor Prof Njuguna Ndungu said the 2 sharia-compliant banks in Kenya – First Community Bank ( and Gulf African Bank (GAB – have contributed to the development agenda by participating in the sukuk component of infrastructure bonds issued by the central bank on behalf of the Kenyan government. GAB invested KSh500 million (US$6.2 million) in the sukuk portion of a government infrastructure bond issue last year and received a 13.5% rate of return, according to CBK figures.
In Ndungu’s reported speech during the opening ceremony of the Second Gulf African Bank Annual East and Central Africa Islamic conference in Nairobi, the entry of Islamic banking institutions in the country meant CBK was developing new regulations: “Islamic banking prohibits interests and allows profit sharing; however, our prudential returns and disclosure report formats were tailored for institutions which have an element of interest in their financials. We have therefore tailored our returns and disclosure formats to cater for the new market niche,” Ndungu said.
He said the CBK grants exemptions to Islamic banking institutions upon request in transactions that involve wholesale trading and holding land and buildings, since the Banking Act prohibits these activities. He also commended the 2 full sharia-compliant banks in Kenya, both founded within the last 2 years, for enabling formerly unbanked Kenyans, specifically those in the Muslim community and rural areas, to access financial services. The 2 banks have 1,570 loan accounts and 58,548 deposit accounts and control 0.8% of the banking sector’s net assets, according to the report. Islamic banks still require research and innovation to grow and be competitive.
“We are still waiting for ’structured sukuk’ to cover the bonds and T-bills market,” Ndungu said.
According to a report in Business Daily (, ApexAfrica Capital Ltd, recently rebranded from Apex Africa Investment Bank Ltd (the website, does not reflect this) is the issuer and is undergoing approval as required by the Capital Markets Authority. The product is a collective investment vehicle in the form of a unit trust that will require a minimum of KSh25,000 ($311) to start.
Bank Managing Director Kassim Bharadia (listed as Chief Executive on the website) reportedly said the product is in response to investor demand.
According to Islamic finance principles it would avoid interest and gain profits from capital gains and dividends paid by companies whose shares that the unit trust has invested in. It would also target companies that companies that fit within the interpretation of Shariah. Thus it should avoid companies that deal in, for example, alcohol but shares such as plantations will be compliant.
The report says Hamilton, Harrison and Mathews is guiding the issuer in the legal process of issuing the unit trust.
Unit trusts are popular in Kenya, despite a few frauds in the past, according to the news report.


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