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Home Real Estate

Nairobi bourse lists first Islamic bond to tackle housing crisis

Brian Murimi by Brian Murimi
July 31, 2024
in Real Estate
Reading Time: 2 mins read

Kenya has taken a bold step into Islamic finance with the launch of its first Shariah-compliant bond, marking a significant milestone in the country’s efforts to democratise its financial sector and boost financial inclusion.

President William Ruto unveiled the ‘Linzi Sukuk’ bond on Wednesday, a KES 3 billion Islamic security listed on the Nairobi Securities Exchange’s Unquoted Securities Platform (USP).

The 15-year bond is structured to support the construction of 3,069 affordable housing units, directly addressing one of Kenya’s most pressing socioeconomic challenges. This move aligns with the Kenya Kwanza administration’s manifesto, which pledged to leverage the pension industry to fund affordable housing programmes, a key pillar of the government’s economic strategy.

Speaking at the groundbreaking listing ceremony in Nairobi County, President Ruto emphasised the transformative potential of this financial instrument. “We are introducing new, diversified and innovative financial instruments at the Nairobi Securities Exchange that will help unlock broader investment opportunities and further our Bottom-Up Economic Transformation Agenda,” he stated.

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The Linzi Sukuk has been structured entirely with locally sourced funds through a Public-Private Partnership (PPP), showcasing Kenya’s growing capacity to mobilise domestic resources for large-scale development projects. This approach could potentially reduce the country’s reliance on external borrowing for infrastructure development.

One of the most striking features of this initiative is its focus on affordability. The bond is expected to facilitate housing provision at an average cost of KES 1.4 million per unit, with monthly payments as low as KES 7,700 over a 15-year period. This pricing structure aims to make homeownership accessible to a broader segment of Kenya’s population, particularly those in lower and middle-income brackets.

President Ruto further elaborated on the broader implications of this financial innovation: “The landmark issuance of the Shariah-compliant Linzi Sukuk will not only promote financial inclusion, but it will also broaden market access, aligning with the global move towards more stable and robust economic growth.”

The introduction of the Linzi Sukuk is part of a larger strategy to diversify Kenya’s financial instruments and attract a wider range of investors, including those who adhere to Islamic financial principles. This move is expected to deepen Kenya’s capital markets, potentially attracting more foreign investment and positioning Nairobi as a competitive financial hub in East Africa.

The success of this bond could indeed pave the way for more Shariah-compliant financial products in Kenya and potentially across the region. It also addresses the growing demand for ethical investment options, aligning with global trends towards sustainable and socially responsible finance.

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Brian Murimi

Brian Murimi

Brian Murimi is a journalist with major interests in covering tech, corporates, startups and business news. When he's not writing, you can find him gaming, watching football or sipping a nice cup of tea. Send tips via bireri@thesharpdaily.com

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