The National Treasury department confirmed that it has launched the Islamic Finance Project Management Office ahead of Kenya’s debut issuance of a sovereign shariah-compliant bond, known as a sukuk.
The body will be tasked with developing Kenya’s Islamic finance policy as part of its bid to join the Organisation of Islamic Cooperation (OIC), which will give the country access to cheaper loans from the Islamic Development Bank.
In recent years, Kenya’s bourgeoning Islamic finance industry has seen the emergence of two banks, five Islamic banking windows offered by commercial lenders, insurance firms and a unit trust fund looking to capitalise on the country’s 11 million-strong Muslim population.
Sharia-compliant products including pension funds and insurance products are based on religious guidelines such as bans on alcohol and gambling, similar to socially responsible funds in western countries.
Finance that complies with Islamic sharia law shuns payment of interest rate in favour of sharing profit.
Globally, Islamic finance has been growing exponentially with new issues have gone from $5bn (£3.3bn, €4.2bn) in 2003 to $134bn in 2012.
"We have a real opportunity to attract local investment and capital inflows both from Muslim and non-Muslim locally and internationally," Kamau Thugge, the principal secretary at the Treasury, said in a statement.
The move coincides with the government’s push to promote Kenya’s capital city Nairobi as an IFC.
In May, the Treasury published the first draft of the Financial Services Authority bill which set out plans to merge four regulators in the sector into one overarching watchdog, to be known as the Financial Service Authority (FSA).
The bodies to be combined include Retirement Benefits Authority (RBA), the Insurance Regulatory Authority (IRA), the Capital Markets Authority (CMA) and the Sacco Societies Regulatory Authority (Sasra).