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Kenya to put in place an Islamic finance law by end of 2016

Xinhua, February 18, 2016 Adjust font size:

The Kenyan government announced on Wednesday it will put in place an Islamic finance law by end of 2016.

Attorney General Professor Githu Muigai told an Islamic forum in Nairobi that stakeholders are currently being consulted to come up with a final draft.

"We hope to table the bill in parliament in the next few months so that the law is in place by the end of 2016," Muigai said during the East Africa Islamic Finance Summit 2016.

The one day event brought over 200 participants to explore opportunities in the Islamic finance sector.

Muigai said that although Kenya's legal framework has been improved over the years, it still needs significant changes for Islamic financing to reach its potential. In 2008, Kenya amended its banking laws to allow Islamic banks to operate.

Since then, the Central Bank of Kenya has licensed two Islamic banks while a number of conventional banks are now offering Islamic financial products.

Muigai said that the new laws will better regulate Islamic financial products that are currently being offered. "A thorough review of all existing laws will be undertaken so as to fill in the existing legal gaps," he said.

Muigai added that the new law will empower the national treasury to expand Islamic banking which is an alternative source of finance.

"It will also reduce the cost of financing of infrastructure projects in Kenya," he said. Islamic banking in its various formal and informal frameworks has been in existence for several decades.

However in the recent past its popularity has grown exponentially. According to the Attorney General, Islamic financing has now gained wide acceptance as a form of financial intermediation.

He said that Islamic financing promotes financial inclusion and is therefore critical to poverty reduction.

The AG noted that the development of Islamic banking will add to the diversity of the financial industry. The National Treasury has announced plans to float an Islamic bond in the international capital markets in 2016. Endit