The National Treasury is reviving its plans to tap the growing appetite for Islamic bonds after earlier arrangements hit regulatory headwinds.
Kenya which is battling a shortage of financing due to heavy spending and rising rates is keen to exploit the Islamic sukuk whose rates are lower.
Treasury Secretary Henry Rotich said the planned move has been occasioned by the highly discounted nature of Islamic bonds providing Treasury with a cheaper financing option for the country’s huge budgetary needs.
“The sukuk will be based on the financing needs. At that time (when we eventually launch) we will indicate what we need,” said Mr Rotich on the sidelines of the First International Islamic Finance Conference for Africa held in Nairobi.
First major Islamic bond
On Monday, Mr Rotich said Treasury had now set wheels in motion for what would be the first major Islamic bond by an East African nation to raise funds.
He said the process would however be preceded by a planned review of the necessary banking laws and also planned membership by Kenya to both the Islamic Development Bank and Organization of Islamic Cooperation.
Some of the African countries that have successfully issued an Islamic bonds include South Africa, Sudan, Nigeria, the Gambia, Senegal while several others are in the pipeline.
“We estimate that in the next one year we shall have completed the documentation we need (for the sukuk launch),” said Mr Rotich.
Islam Finance prohibits interest, so sukuk bonds entitle investors to a share in the returns generated by an underlying asset.