Launch Partners

Launch Partners

Country Analysis: KENYA

Key highlights

  • Kenya has robust investment architecture, but the current regulatory framework falls short, hindering development of Islamic investments and finance.
  • Kenya aims to be the Islamic financial hub for East Africa.
  • Islamic finance offerings are miniscule compared with its conventional counterpart.


Kenya is the largest economy in East Africa, commanding approximately 40% of the region’s GDP in 2023 at KES15.14 trillion (US$114.67 billion). With relatively stable politics, an emerging middle class and a youthful skilled demographic as well as a conducive regulatory environment, Kenya is an attractive investment destination.

There are also opportunities to position Kenya as an Islamic investment center as the government seeks to promote Kenya as a regional financial hub under Kenya’s Vision 2030 blueprint, aiming to also make the nation a regional Islamic financial hub.

The Kenyan government has shown interest in developing this market: in 2016, it established the Project Management Office for Islamic/participation finance to coordinate national efforts including establishing a national Shariah board and introducing tax reforms.

The East African nation is still without a national framework, and progress may seem lackluster. Market participants have attributed the lack of growth to limited awareness, perception issues, less-than-conducive regulatory environment and fierce competition from the conventional space.

Nonetheless, there have been several indications that Islamic finance has not been placed on the backburner including the government integrating Islamic finance as part of its Vision 2030 and measures to introduce a national Shariah board. The Capital Market Authority (CMA) also continues to undertake public awareness and capacity-building initiatives.

Despite the absence of a comprehensive Islamic banking and financing framework, Islamic banks have been operating in Kenya for nearly two decades since the first fully-fledged bank, Premier Bank (formerly known as First Community Bank), opened its doors in 2007.

Regulatory environment

The regulation of the country’s financial systems falls under the Central Bank of Kenya (CBK) and the CMA. To promote investments in Kenya, the government established the Kenya Investment Authority in 2004.

The Central Bank of Kenya (CBK) proposes every financial and banking legal framework which will be approved by the parliament. The Central Bank of Kenya Act is a declared legislation by the constitution with objectives of licensing and supervision of all banks and policy formulation. This Act is a unified regulatory approach that does not draw any difference to the Islamic banks that separates them from conventional banking.

In August 2023, the Parliamentary Budget Office put forward proposed changes to the existing Central Bank Act, CAP 491 to grant the CBK the authority to license and supervise Islamic banks and Islamic financial institutions. The proposed legislation establishes the Sharia Advisory Council of the CBK which allows the responsibility of formulating and monitoring Islamic financial institutions.

The CMA targets to formulate an environment allowing investors to explore Shariah products to act as an alternative to traditional investments. FCB Capital and Genghis Capital are among the licensees to offer Islamic products.

Financial experts in Kenya are actively working toward the regulations of Islamic financing within institutions nationwide. Transitioning financial services and products to adhere to Shariah principles holds the promise of substantial cost reduction by eliminating the need for additional expenses required for regulatory compliance. However, Islamic financial institutions face the challenge of aligning with both Shariah laws and CBK guidelines, resulting in a dual compliance requirement that puts them at a competitive disadvantage. This double compliance burden is likely to increase operational costs, potentially rendering it difficult for institutions to maintain sustainability.

Investment market

Kenya’s investment environment allows foreign investors to hold 100% ownership in permissible investment regimes, so long as such holding power does not pose a security risk to the nation outlined by the country in the Capital Markets Act.

Being the financial hub of the East African region, Kenya serves as a gateway for investors looking for opportunities in the broader regional market. The investment horizon is wide and highly regulated; however, it is also open for the most part, in the sense that the need to go through a central authority is not compulsory.

Foreign investors are allowed to participate in private equity investments, also called alternative investments funds (AIF). The AIF provider is required to secure a license from the CMA prior to commencing any operations of acquiring funds from investors (CMA AIF regulations 2023). There are no limitations on the residential status of investment entities; however; a minimum amount of investment in its local currency must be fulfilled and maintained. There is no regulation pointing specifically to Shariah AIF counterparts in the AIF Act. The latest amendments of the AIF framework took effect in December 2023.

The CMA is also drawing up guidelines for Shariah REITs. As of May 2024, there are still no Islamic REITs offered to the market, only conventional REITs were offered by Acorn Holdings and ILAM.

Asset management

As of May 2024, the number of conventional and Islamic collective investment schemes (CISs) summed up to 138, offered by 36 registered licensees approved by the CMA. A majority of the funds are offered in the conventional space with minimal offerings in the Islamic realm. Genghis Capital Amana Fund was the first Shariah compliant CIS in Kenya launched back in 2013. Kenya launched one fund in 2022 — the Etica Shariah fund — and one fund in 2023 — the Kuza Shariah Momentum Fund — but information disclosures such as asset breakdown and assets under management of the aforementioned funds are vague.

Clearly, Islamic CISs is an extremely niche portion across the entire CIS landscape in Kenya. It has proved challenging for the nation to be considered attractive as far as the Islamic asset management industry is concerned. Strong demand in Islamic CISs will be a major factor and potentially a tipping point for the CBK and the CMA deciding to develop this sector further.


Islamic banking and Takaful are already embedded in the Kenyan financial system but the system is lacking on other fronts. There is certainly room for improvement in the area of Islamic asset management and investments. Time could be the key to determining whether Kenya’s Vision 2030 can materialize.

To enhance the reach of Islamic finance, the Kenyan market should focus on cultivating an inclusive capital market, allowing wider access to Islamic financial products for individuals currently relying on conventional interest-based services.

This report was produced by Elliot Yip and Aravinth Rajendran, financial data analysts at IFN Investor.


Suggested for you


Please enter your comment!
Please enter your name here