It has been two decades since Islamic finance products were introduced in Kenya in response to growing consumer demand. Major banks like Absa, KCB, and Standard Chartered have since rolled out basic banking products catering to customers seeking interest-free financial solutions.
The list of Islamic financial services providers has widened and currently includes full-fledged banks like the Dubai Islamic Bank Kenya, Takaful Insurance of Africa, Salaam Investment Bank, Salaam Microfinance Bank, Taqwa Sacco, Salih Pension Fund and Amal Provident Fund.
Despite having such a huge pool of Islamic finance service providers in Kenya, there are hurdles that bedevil the growth and development of the industry, which none of the institutions can overcome without sound partnership. Some of the hurdles include lack of enabling regulatory, liquidity management, supervisory and tax frameworks.
None of the Islamic finance industry players on their own can address these challenges without effective collaboration, cooperation and sound partnerships. In fact, the very foundation of the industry was laid through a participatory mechanism designed to promote a shared vision of prosperity, inclusivity, ethics, transparency, fairness and justice.
Recognising the importance of collaboration, leaders in the industry have initiated the formation of the Association of Shariah Compliant Service Providers of Kenya. Through the association, the member institutions shall undertake advocacy and lobbying to overcome the barriers to the development and growth of the industry.
They shall have a collective voice to facilitate the demystification of IF and promote it as an alternative finance model to foster financial inclusion and deepen the financial market. These objectives can easily be achieved with continuous consumer awareness creation, robust financial literacy initiatives, capacity building for professional bodies and Shariah scholars.
The association will facilitate research and generate evidence-based data to support policymaking. Collective industry data on contributions to the economy through taxes, job creation, income generation, entrepreneurship, and investment could significantly influence responsive policy frameworks.
One of the urgent tasks for the association is to gain recognition from key stakeholders and engage in self-regulation.
Despite numerous attempts by Muslim leaders to engage the government on policy and regulatory gaps, these efforts have not produced the desired outcomes. This is largely because the government lacks the capacity to address the sector’s needs effectively, and the market players have not organised collectively to guide policymakers.
For the Islamic finance industry to progress, there is an urgent need for stakeholders to come together to provide leadership and direction to government agencies.
The writer is a director at Salaam Microfinance Bank and an Islamic finance consultant.