Nairobi February 07, 2018…CPF Financial Service has commenced a process leading to a Sharia-compliant pension fund in Kenya. The development of the product which will be provided to its membership through a segregated fund within our Defined Contribution Pension Schemes shall be in compliance with Islamic principles, and was informed by growing interest and demand for Shariah compliant pension products from CPF’s customers.
Unlike conventional pension funds, Sharia-compliant schemes are prohibited from the payment or receipt of interest, typically referred to as ‘riba’ under Islamic Law. They are also forbidden from investing in products such as alcohol and tobacco.
CPF Financial Services CEO, Mr. Hosea Kili, said: “The Shariah compliant products we are developing shall be administered under the supervision and guidance of a team of Shariah scholars to ensure that we conform to the Shariah principles and tenets.”
The Retirement Benefits Authority (RBA) licensed Kenya’s first Sharia-compliant pension product in 2013, but no other sharia-compliant pension products have been introduced ever since to meet rising demand.
“We realised there is growing demand for sharia compliant pension products but limited choices for customers to choose from. Our new product is aimed at meeting this growing demand and will be available to all Kenyans,” said Mr. Kili.
Sharia-compliant products are typically available to people of all faiths but must be run under the supervision of sharia scholars. CPF’s sharia-compliant pension fund will not be any different. The product has been developed in consultation with Sharia experts, including Aqeel Consulting, a leader in Kenya’s fast-growing Islamic Finance Industry.
Under Shariah-compliant fund, every investment must be authorised by a panel of Islamic jurists. Each sharia fund must have a supervisory panel, which will take on a strong governance role, and issue a fatwa on the offering document, which is the Islamic equivalent of regulatory approval.
“We shall continue to draw insights from the Shariah scholars and abide by the Shariah guidelines and standards issued by esteemed bodies of Islamic Financial Institutions,” said Mr Kili.
Sharia-compliant products are set to play an instrumental role in the ongoing efforts to transform Kenya into an International Financial Centre. These products have gained popularity in financial markets around the world and also in Kenya, where regulators such as the RBA, CMA and CBK have existing frameworks to guide their rollout into the market.
CPF Financial services is the administrator of LAPTRUST Scheme, which is now in its 87th year of service to the nation; the County Pension Fund, the pension scheme for all County Governments’ employees and the CPF Individual Pension Fund for state officers gratuity investments and voluntary pension savings.