CENTRAL BANK OF KENYA
Remarks
by
PROF. NJUGUNA NDUNG’U
GOVERNOR
LLAAUUNNCCHH OOFF FFIIRRSSTT CCOOMMMMUUNNIITTYY BBAANNKK’’SS MMUUTTUUAALL FFUUNNDD
Intercontinental Hotel
6th March 2012

Ms. Stella Kilonzo, Chief Executive, Capital Markets Authority;
Mr. Steve Mainda, Chairman, Insurance Regulatory Authority;
Mr. Hassan Varvani, Chairman, First Community Bank Ltd;
Mr. Abdullatif Essajee, Managing Director, First Community Bank Ltd;
Mr. Nathif Adam, Director, First Community Bank Capital;
All the Excellencies here present;
Board Members of First Community Bank Ltd here present;
Distinguished Guests;
Ladies and Gentlemen:
I am delighted to be with you this evening at the launch of First Community
Bank’s Shariah-compliant mutual fund and to celebrate the success of Islamic
Finance.
Allow me at the outset to compliment the Board and Management of First
Community Bank Ltd for growing the bank from a start-up operation in April
2008, to an institution now boasting of deposits amounting to Ksh.7.3 billion and
assets of Ksh.8.4 billion as at 31st January 2012. Indeed, First Community Bank
Ltd pioneered the establishment of Shariah-compliant banking in Kenya and I am
happy to note that the bank has continued to keep up the momentum by
introducing a range of innovative Shariah-compliant products. These products
will go a long way in deepening Kenya’s financial sector. We can now boast of
having a full-fledged Shariah-compliant financial infrastructure, thanks to the
effort of Nathif Adam.
Ladies and Gentlemen: Kenya has not been left behind in the world-wide
phenomenal growth of Shariah-compliant finance and banking and huge gains
have been made since its inception. Today, we have two banks that exclusively
offer Shariah-compliant products and who collectively, command a market share
of 1% of the banking sector assets, in less than 4 years of operations. Having
noted the growing interest in Shariah-compliant finance, some of the
conventional banks have also created specific windows and divisions to enable
them offer Shariah-compliant products to their customers.

I am encouraged to note that other institutions have now stepped in to offer
Shariah-compliant financial services beyond banking. Takaful Insurance of
Africa has been licensed by the Insurance Regulatory Authority to offer Shariahcompliant insurance services. Although the concept of “Takaful” has been in
existence in the global arena for several decades, this product is now being
offered for the very first time by an entity incorporated and licensed in Kenya.
Ladies and Gentlemen: First Community Bank Ltd has again trail-blazed by
introducing a Shariah-compliant mutual fund. I am informed that the fund will
be denominated in Kenya Shillings and the aim is to pool funds amounting
to Ksh.1 billion. The fund will invest principally in Sharia-compliant opportunities
in Kenya and other countries in the Eastern Africa region and may also
undertake offshore investments. The bank intends to invest in money market
instruments, equity, structured investments and other collective investment
schemes that are all Shariah-compliant. Indeed, this fund will avail investment
opportunities to many people, particularly those who could not invest in the
available products on account of faith-based or other risk related restrictions. It
is a welcome addition to deepening Kenya’s nascent capital markets. This move
is also a positive step towards not only attracting increased foreign direct
investments into the country and the region at large, but also enhancing the
capacity of the Kenyan people to harness the available resources for national
development.
As you are aware, a key goal of the Government of Kenya, as espoused in
Vision 2030 is establishing Kenya as a premier financial services hub in the
region with a wide range of competitive products and services. One of the ways
of achieving this goal is ensuring that Kenya becomes the gateway for Shariahcompliant financing, through establishment of an enabling environment that
supports the development of Shariah-compliant financial services and products.
To this end, the Central Bank has in the recent past liaised with the Shariahcompliant banks and established the main challenges that impede the
achievements of this objective. Some of these impediments are:

Inadequate Shariah-compliant products. For example, the lack of Shariahcompliant liquidity instruments places Shariah-compliant banks at a
disadvantage compared to the conventional banks;
Uncertainty on the tax treatment of Shariah-compliant financial instruments;
Inadequacy of the requisite human capital with respect to Shariah-compliant
finance.
Ladies and gentlemen: The Central Bank is in this regard engaging other
relevant arms of Government to address these challenges in order to propel
Shariah-compliant finance to the next level.
The future of Islamic Finance in Kenya and in the region remains bright. On its
part, the Central Bank will continue to pursue policies that create an enabling
environment that will eventually culminate in Kenya establishing itself as a
regional financial hub as envisaged in Vision 2030.
With these few remarks, I want to wish First Community Bank Ltd as well
as the First Community Bank Capital (Investment Bank) the best in their
future endeavours. The Islamic Finance picture is thus complete.
Thank You