Players in Kenya's Islamic finance sector say the fast tracking of a proposed law on Islamic finance will boost uptake of their services in the country.

The financial institutions say that they have had to contend with double compliance that has partly made some of their products expensive thereby slowing uptake in the country.

Islamic finance is a system of finance that complies with Islamic law (Sharia) principles, which prohibit certain financial practices such as charging or paying interest (riba) and engaging in excessive uncertainty (gharar).

Takaful Insurance CEO Samayya Hassan said lack of legal framework has limited the uptake in the county due to double regulations, calling for a speedy resolution on the Bill sponsored by Wajir West Member of Parliament Yusuf Farah.

The Central Bank of Kenya Amendment Bill, 2023 seeks to establish a regulatory framework for Islamic banks and financial institutions, to be expressly recognised under the Central Bank of Kenya Act.

"Currently, a bill is before parliament proposing an establishment of Islamic Advisory Council at the Central Bank of Kenya to regulate Islamic Banking with similar efforts already made in the insurance and capital markets regulators,” said Samayya.

Islamic finance expert Ahcene Lahsasna said the move would streamline the institutions and increase the uptake of the products in the Kenyan market, which have been hindered by a lack of legislation.

“We have had to comply with conflicting regulations and duo level of compliance that has been increasing our costs,” said Lahsasna.

In Kenya, Islamic banking has made some inroads with several banks, both conventional and Islamic, offering Islamic banking products and services.

These banks have established dedicated Islamic banking windows or branches to cater to the needs of Muslim customers who prefer Sharia-compliant financial products.

The Takaful an Islamic alternative to conventional insurance that operates on the basis of risk-sharing and mutual cooperation is also looking to grow its inroads in the country

Capital Markets Authority (CMA) is in the process of activating an Islamic Capital Market initiatives to tap what is an estimated $3.95 trillion (Sh588.75 trillion) global market.

The regulator last month approved the issuance of Kenya's first ever-Islamic bonds to raise Sh3 billion for affordable housing. Linzi Finco Trust will issue the instruments also known as Sukuk Bonds.

Islamic Capital Markets (ICM) is basically a series of activities in the capital market that comply with Islamic principles. The sub-sector promotes Sharia-compliant securities as alternatives to conventional ones, and provides investment opportunities for a wide range of investors.

It has instruments like Murabahah Sukuk, Ijarah Sukuk, ordinary stocks, preferred stocks, Islamic Mutual Funds and single stock features that enable financial activity without disobeying the Sharia law. Growth potential

The ICM is expected to hit $5.9 trillion (Sh879.4 trillion) by 2026 based in its growth potential.