NAIROBI, April 27 (Xinhua) -- Kenya is considering implementing a series of tax incentives in order to attract issuance of green bonds, the capital markets regulator said on Friday.
Paul Muthaura, CEO of Capital Markets Authority (CMA), told journalists in Nairobi that the incentives are aimed at playing a role to accelerate country's transition to a low carbon economy.
"We have submitted a policy proposal to the national Treasury on the tax treatment for green bonds. The proposal seeks the government to extend the current tax exemption on infrastructure bonds to include green bonds," Muthaura said during the launch of the Capital Markets Soundness Report Volume VI.
The ultimate objective of the sixth edition of the report is to provide credible data to inform strategies on mitigating key risks affecting Kenya's capital markets as well as identify the opportunities presented.
The capital market regulator also plans to amend the law to clearly define green bonds to aid the review and approval of green guidelines to be issued by Nairobi Securities Exchange (NSE).
Muthaura noted that his organization is currently working with the NSE and the private sector to explore the issuance of green bonds as a way of tapping into a targeted class of investors, both domestic and foreign.
In addition, the NSE has also proposed amendments to its listing rules to introduce a sub-segment for green bonds within the fixed income security markets.
Muthaura said green finance could be used to fund the initiatives around re-forestation, improving water and waste management systems as well as the generation of sustainable energy.
In 2016, Kenya became a signatory to the Paris Climate Agreement which became international law following the Marrakesh Climate Conference.
Muthaura noted that the issuance of green bonds is one way to help the country adapt to and mitigate climate change.
The regulator said that green bonds are one of the innovations that Kenya will introduce in order to expand the role of the capital market in mobilizing resources to spur social economic development.
Muthaura added that through the realignment of capital markets products and services, Kenya will be able to tap green bonds and finance to boost investments in agriculture, manufacturing and infrastructure development.
Luke Ombara, the Director of Regulatory Policy and Strategy at CMA, said that Kenya like other emerging market economies is characterized by capital markets with low liquidity levels averaging between seven percent and nine percent per annum over the last two years.
"In order to mitigate this risk, we will roll out an awareness campaign to education entrepreneurs on the benefits of using the capital markets to raise finance for business expansion instead of relying on commercial loans," Ombara said.
He noted that while Kenya is keen to embrace financial technology, it will be proactive in protecting investors from potential fraud.
The CMA through a cautionary notice has warned investors against taking part in Initial Coin Offerings (ICOs) for cryptocurrencies, indicating that to date the authority has not approved any ICO, taking the position that the ongoing offerings are unregulated and speculative investments with considerable risk exposure to the investor.
Ombara said the Derivatives Unit of the CMA has been undertaking various awareness and capacity building initiatives targeted towards key stakeholders in anticipation of successfully launching exchange traded derivative products in Kenya.
He also observed that all of Kenya's online currency traders, dealers and money managers are now compelled to obtain a license from the Authority to continue in the business.
"This is in line with the authority's efforts to exercise a measure of regulatory oversight over online foreign exchange business to ensure adequate arrangements for investor protection," he added.
