FC Bank in Kenya Launches Shariah Compliant Takaful Services

The Capital Markets Authority (CMA) has approved the registration of a unit trust scheme promoted by First  Community Bank (FCB) for Shariah compliant insurance services.

In a statement yesterday, the authority said an application by FCB to register the First Ethical  Opportunities Fund complied with the provisions of the Capital Markets (Collective Investments Schemes) Regulations 2001.

Mrs Stella Kilonzo, the authority’s chief executive said ethical investing, also known as Socially  Responsible Investing (SRI), is underpinned by an investment strategy that seeks to maximise financial returns and social good in keeping with global trends.

"This new fund, which is a unit trust scheme, will help Kenya attract foreign portfolio investors as Socially Responsible Investing (SRI) is a growing business in both the USA and Europe," said Kilonzo.

It is estimated that one out of every nine dollars under professional management in the USA was involved  in SRI in 2007.

It is expected that the SRI market in USA will reach $3 trillion this year up from $2.7trillion in 2007.The European SRI market grew from 1 trillion euros in 2005 to 1.6 billion euros in 2007.

Major ethical funds globally include Norwich Union Ethical Fund, Old Mutual Ethical Fund, Aberdeen Ethical  World Fund, and Aviva UK Ethical Fund.Mrs Kilonzo noted that socially responsible investors favour corporate practices that promote environmental stewardship, consumer protection, human rights, and diversity.

"In developed SRI markets, a screening criteria has been put in place with clearly set out benchmarks for  qualifying such funds. We note that the fund will be investing in line with Sharia law," said Kilonzo.

The approval of SRI comes barely a week after Takaful Insurance of Africa (TIA), the first fully-fledged  shariah compliant insurance company was officially launched in the Kenyan market.

TIA’s business model is based on shariah principles of transparency, equity and giving participants superior services at the best rates. 

Under the company’s unique model of operation, people seeking insurance cover will pay premiums to a  collective fund from which payments will be made to members who suffer from the risks covered.

But unlike in the traditional insurance practice, the new insurance model, known in Islamic jargon as  Takaful, is both an investment offering as much as it covers members.This means that by purchasing a  policy someone definitely becomes a member of the takaful risk fund and is entitled to compensation should he/she suffer a loss.

Source

Article from Global Islamic Finance Magazine