2.2: Capital market financing for Kenya's core strengths

Measurement
Review commissioned by Implementation Committee followed by proposals for action - potential for input under The CityUK MOU.
Working Group
Achievement

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.

Status
In Progress
Measurement
CMA with support from IFC or donors to organise support in the form of technical assistance for potential infrastructure issuers.
Working Group
Achievement

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.

Status
In Progress
Measurement
CMA to work with National Treasury and leading fund management groups to develop and implement plan for removing barriers.
Working Group
Achievement

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.

Status
In progress
Measurement
Implementation Committee to commission report and work with National Treasury and KRA to address issues identified - potential for input under CityUK MOU.
Working Group
Achievement

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.

Status
In Progress
Measurement
CMA, with other regulators, to review needs for further development. Short term. Potential for input under CityUK MOU.
Working Group
Achievement

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.

Status
In progress
Measurement
Islamic products and services covered in each piece of financial sector regulation.
Working Group
Achievement

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.

Status
In Progress
Measurement
Contact LSE, Central Bank of Malaysia to identify potential support to leverage existing CMA and Central Bank relationships.
Working Group
Achievement

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.

Status
In Progress
Measurement
Policy actions such as this need to be approved by the National Treasury and hence need to be included in CMA’s annual Memorandum of Policy Proposals to Treasury which sets out its policy proposals for the current year. Annual programmes discussed and agreed with stakeholders should also be rolled out.
Working Group
Achievement

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:

  • 3rd March 2017 - Capital Markets White Paper developed by PMO and exposed to the Compliance & Facilitation Committee of the Authority;
  • March 2017 - RBA & SASRA secured internal board approvals of their individual policy proposal to facilitate recognition of Islamic Finance as an alternative financial proposition;
  • 30th March 2017 - Budget 2017/18 presented and read to Parliament wherein a number of Islamic Finance proposals affecting Sectoral laws were contained herein;
  • 4th - 6th April 2017 - The PMO was represented at the 2nd Sub-Saharan Africa Islamic Finance convention held in Kampala, Uganda and the IFSB held it's AGM in Kuala Lumpur, Malaysia hosted by Bank Negara, Malaysia;
  • 10th - 11th April 2017 - 2 participants each from the Financial Sector Regulators attended the 2nd East Africa Economic Summit held at Villa Rosa Kempinski Hotel, Nairobi;
  • June 2017 - Meetings held with the Director Financial Markets and Sectoral Affairs/Other National Treasury representatives, Corporate Communications reps from the FS regulators and In-House PMO review;
  • 11th July 2017 - The Chairman Mr. Christopher Osiebe, Director Financial Markets and Sectoral Affairs, the National Treasury convened the first IFCC meeting held at the NT;
  • 12th July 2017 - One on One media briefing held with the Business Daily Journalist by PMO lead Mr. Farrukh;
  • 17th - 18th July 2017 - Training on Sukuk held in Naivasha;
  • 16th - 17th August 2017 - CBK and NT representatives attended the 11th IFSB International Centre for Education in Islamic Finance (INCEIF) Executive Forum held in Kuala Lumpur, Malaysia;
  • 22nd August 2017 - Meeting at the National Treasury between NT, NIFCA, PMO and REDmoney Group which is the global provider of specialized Islamic Financial Media Services;
  • November 2017 - Nairobi Securities Exchange (NSE) and Nasdaq Dubai sign a Memorandum of Understanding to fast-track development of a Sukuk sector at the bourse;
  • 29th November 2017 - The National Treasury convened the second Islamic Finance Consultative Committee (IFCC) meeting in which members committed to the ideals of developing Kenya as an Islamic Finance hub and signed the TORs.

Status
In Progress

Key

No Progress
Behind Schedule
Ahead of Schedule