2.2: Capital market financing for Kenya's core strengths
Policy Paper on securitization as a mechanism for infrastructure financing submitted to NT for consideration in 2016. Stamp Duty exemption for tax neutrality for Real Estate Investment Trusts (REITs) and Asset Backed Securities (ABS); Exemptions from VAT (Value Added Tax) for REITs, Islamic FInance Products and ABS and Exemption from payment of Stamp Duty on the transfer of titles relating to Sukuk arrangements achieved through the Finance Act 2017. New market segments for listing of Real Estate Investment Trusts (REITs) established in 2016.
Investor sensitization programs targeting potential issuers, arrangers/transaction advisors and providers of guarantees have been implemented guided by Medium-term Plan 2 Vision 2030 infrastructure flagship projects. Engagements undertaken with Kenya Maritime Authority, Kenya Ports Authority, Kenya Roads Board and County Governments.Stanlib Fahari Income-REIT of Ksh 3.6 billion was listed on the Nairobi Securities Exchange on 27th November 2015 as the pioneer REIT product.The World Bank IFC has provided technical assistance to the Authority by providing expert advisory in the development of the Policy Guidance Note on ABS. Additionally, the IFC offered technical guidance to potential ABS issuers including; Kenya Pooled Water Fund, Capital Tool Company, Umati Capital Kenya Limited and Vaell as well as their leagal and transaction advisors by going through their respective ABS applications with them.The IFC in collaboration with the Authority has also conducted workshops to sensitize potential issuers such as Kenya Roads Board and the KWS on the ABS framework. However, neither of the potential issuers has submitted any formal application to the Authority this far.
The implementation framework for the actions contained in the World Bank/IFC report on mutual funds developed and adopted.Statutory reporting templates developed and operationalised in Q4 2016. Development of Performance Reporting & Dissemination Framework and Review of Legal Framework ongoing under consultative workstream with WG 2 & 3.
Tax Neutrality for Real Estate Investment Trusts (REITs) addressed through exemption of stamp duty and VAT. The Collective Investment Schemes Framework will be comprehensively reviewed in the 2017/2018 financial year.
Through Finance Act 2017, the definition of securities in the Capital Markets Act was amended to securities and Collective Investment Scheme products structures in conformity with Islamic principles of investment. Development of the National Islamic Financial Policy Paper is underway. This is to inform the regulatory framework for Islamic Capital Markets.
The Project Management Office has been set up in 2015 drawing membership from all the financial sector regulators under the technical guidance of an international Islamic Finance expert (IFAAS).Subsectoral research papers developed to assess status and operational challenges of Islamic Finance in Kenya in 2016. Draft amendments to regulatory framework developed.Proposed amendments to the Capital Markets Act, the Cooperatives Societies Act and Sacco Societies Act to facilitate issuance of shariah compliant finance products adopted vide the Finance Act 2017. The Public Finance Management Act (PFMA) was amended to provide for issuance of sovereign Sukuks (Islamic bond in March 2017);Amendment of tax statutes to provide for equivalent tax treatment of these Islamic Financial products with the conventional financial products adopted in March 2017. Shariah governance framework developed awaiting stakeholder engagement.
The Project Management Office has been set up drawing membership from all the financial sector regulators under the technical guidance of an international Islamic Finance expert (IFAAS). PMO members certified under CISI.Two technical committees have been established to guide on the operationalisation of Islamic Finance in Kenya. The Islamic corporate governance structure upon which Kenya’s Islamic finance industry will operate has also been established with the formation and official launch of the Islamic Finance Steering Committee (IFSC) and Islamic Finance Consultative Committee (IFCC) with the former drawing members from financial services regulatory bodies and the latter being members drawn from the industry, including Islamic scholars. The members have since been gazzeted in the Kenya Gazette.The Authority was admitted as an associate member of IFSB in December 2016.
Policy proposals continously submitted to the National Treasury.Partnered with Awal Consulting and Islamic Research and Training Institute to organise the first international Islamic conference in Kenya held in Nairobi on 25-26th January 2016.On 17th February 2016, together with GBS Africa, the Authority co-hosted the East Africa Islamic Finance Summit held in Nairobi.In December 2016 the Authority joined IFSB as an Associate Member The key events held are as follows: