It has been a month since Kenya launched its Nairobi International Financial Centre (NIFC) also known as the Centre. During the official opening, Kenyan President, Uhuru Kenyatta, stated that the NIFC will create an environment for fintech to thrive; for innovation and new technologies such as artificial intelligence to be mainstreamed; and for investors to inject new capital into Kenyan and regional businesses.
The NIFC was established under the Nairobi International Financial Centre Act 2017 (the Act). Whereby the Act seeks to provide the legal framework for the development of an efficient and globally competitive financial services sector in Kenya that generates high levels of national savings and investments.
The overall objective of the NIFC is to attract large foreign firms and boost capital flows by creating a framework that will improve Nairobi’s status as an economic hub for foreign investment in Africa. This will be achieved by enabling companies and investors to take advantage of trade and investment opportunities – with the aim of raising more than $2 billion (Sh235.74 billion) in investments by 2030.
“Kenya’s proposed new gateway
to foreign investment”
The Kenyan hub is expected to model Nairobi as a financial district in line with existing financial centres in European, Middle East and the Far East capitals such as London, Dubai and Hong Kong.
Despite Kenya’s relatively developed capital markets, 75% of all business financing in the economy was from the banking sector, while the balance came from the capital markets. The launch of the NIFC intends to change this scenario.
What is the function of an International Financial Centre?
An international financial centre (IFC) is a location with venues and facilitating services for international activity in areas such as banking, asset management, insurance, and financial markets. It works in a regulatory framework that fulfils international standards.
The Nairobi International Financial Centre is a new business environment, established to make it easier and more attractive to invest and conduct financial services and related activities in and from Kenya. According to the chief executive, Oscar Njuguna, Nairobi’s IFC intends to assist firms that are targeting the capital city through the hub to get faster access to work permits and other regulatory licences.
How do you become a NIFC firm?
Firms considering conducting business through the NIFC must apply for certification by the NIFC Authority. The NIFC Authority will provide a checklist of the required documentation and upon receipt will review and process all applications. Certification is open to both domestic and international firms as long as they meet the requirements. Firms proposing to conduct regulated financial activities such as banking or insurance will be required to follow the normal licensing and regulatory procedures.
Companies looking to join the NIFC can expect to pay Sh1 million for certification and an annual fee of Sh500,000, regulations published by the Treasury show.
Beyond pulling in capital from around the world, the NIFC also wants to deepen the pools of capital available for domestic investors. As well as serving as a gateway to Africa for investors, the centre also aims to deepen the local financial and capital markets.
The NIFC will allow businesses to enjoy incentives in areas such as tax and immigration, which have been leveraged by other centres such as Dubai, London, and Johannesburg to attract investments.
Regulations published by Treasury Cabinet Secretary Ukur Yatani set a lower joining fee of Sh100,000 for start-ups and an annual fee of a similar amount. Start-ups are described as firms in the initial stages of setup, which provide an innovative or novel product or service.
“A firm will maintain its start-up status for three years
not including the first year of certification,”
-read the regulations.
International Financial Centres in Africa:
Nairobi joins Casablanca, Cape Town, Port Louis (Mauritius), and Johannesburg as IFCs on the African continent. Examples of IFCs outside Africa are New York City, London, Shanghai, and Hong Kong.
Kenya, the third-largest economy in sub-Saharan Africa, is already a commercial hub, with major global companies having their regional headquarters in the country’s capital.
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