, NAIROBI, Kenya, Mar 1 – The government is planning to set up an integrated commercial centre offering a broad range of financial services to both domestic and international investors.
Besides deepening the country\’s capital markets, the Nairobi International Financial Centre (NIFC) is expected to enable the country to attract international capital to fund long term development projects.
Deputy Prime Minister and Minister for Finance Uhuru Kenyatta said on Tuesday that upon its development, the financial centre would further enhance the country\’s position as a regional services hub and a gateway for capital into the East African Community (EAC).
"The main reasons driving the establishment of NIFC are to develop the capital markets to mobilise resources to finance investments, harness Kenya\’s strengths to gain from regional economic and financial integration," the minister said.
The establishment of a financial centre is one of the flagship projects that have been outlined under the financial sector, which is one of the six key industries expected to drive Vision 2030.
Compared to its neighbours, Kenya\’s financial sector is fairly developed contributing 5.4 percent to the Gross Domestic Product (GDP). The establishment of a financial centre was thus a natural progression of the industry to cater for the regional and international markets.
The integration of the EAC and the implementation of Kenya\’s development blue print, Vision 2030, further increases the opportunities for the country to develop and export international financial services into the region.
"Financial services can potentially contribute as much as eight percent to 15 percent of GDP and increase formal sector employment beyond the current share of one percent," the minister pointed out when he inaugurated a nine-member steering committee that will be mandated with driving the process forward.
Consisting of Permanent Secretaries from the Treasury, Planning, Information and Nairobi Metropolitan development ministries as well as the Solicitor General, Director of the Vision 2030 board and the Managing Partner of Fanisi Capital Markets, the team will be expected to set a sound foundation for the centre.
One of the responsibilities that the committee will be expected to undertake is to develop a legal and institutional framework for the centre which Mr Kenyatta said should be done in a few months time.
"We should not imagine that we are the only ones thinking about this in the region. What this calls for is speed. We don\’t want to establish a committee that will only be a committee in words. We want to see action in the shortest possible time," he said.
The team will also be expected to determine the location of the centre, timelines and the types of financial services to be offered.
Although Nairobi\’s Upperhill is the defacto financial centre, it will not suffice to handle the proposed world class centre.
The project\’s implementation support manager Alex Owino said the location will have to consider infrastructural capabilities, proximity to the airport and other amenities such as those that will be available at the proposed Konza Technopolis.
If they settle on this address, institutions such as the Nairobi Stock Exchange, the Capital Markets Authority and other financial intermediaries will be relocated.
He explained that the centre which will be a hybrid offshore financial hub that serves domestic and international financial entities will be modelled around those of Qatar or Bahrain.
For it to be successful however, a number of factors will have to be taken into account, Mr Owino said.
For instance, while Kenya is a net exporter of financial services in the region, he acknowledged that the country still has a skills shortage in some critical areas such as derivatives which calls for the development of a talent pool.
He further underscored the importance of having a financial infrastructure and transparent and effective regulatory framework as well as a critical mass of institutions in the same place.
"Financial centres cluster competitors, regulators and customers and even professional services providers together who in turn attract more people to come to the cluster," Mr Owino said.
Follow the author at https://twitter.com/cirunjoroge