Nairobi:- When Peter Njuguna received an application for an Islamic Sacco, he nearly approved it. The head of Sacco supervision at the Sacco Societies Regulatory Authority (Sasra) told a room full of regulators last week that what stopped him was discovering that the team that headed the Sacco had never held an official meeting. “We had an application very recently for a Sharia-compliant savings and credit co-operative, which we almost approved, and the guys were telling us it is compliant, yet the committee had never even met,” Mr Njuguna said.
This is what regulators like the Central Bank of Kenya (CBK), Insurance Regulatory Authority (IRA), Capital Markets Authority (CMA), Retirement Benefits Authority (RBA) and Sasra have to grapple with as Islamic finance grows in Kenya. Yet, despite their efforts, some toxic products have been allowed into the market under the banner of Islamic finance. The lack of clarity among regulators has allowed unscrupulous managers to mask certain offerings as Islamic, which has tainted the sub-sector’s reputation in recent months.
Chase Bank was placed under receivership in April after special purpose investment vehicles it had classified as Islamic products were contested. READ MORE Jubilee heavy borrowing pushes Kenya’s foreign debt to Sh3.2 trillion National security budget shoots up as war on terror intensifies Kenya: Team picked to address drought in 12 counties When CBK ordered comprehensive audits for lenders after the collapse of Imperial and Dubai banks, Chase Bank’s auditors, Deloitte, demanded that the Islamic assets held in special purpose vehicles (SPVs) be charged for purposes of proper accounting.
The auditors insisted on treating the lender’s Sharia-compliant products as insider loans, and assessed that the SPVs