Location, Location, Location: The Making of Nairobi As a Financial Hub

Location, Location, Location: The Making of Nairobi As a Financial Hub


For quite some time, intense efforts have been made to further diversify the Kenyan economy and attract more foreign investors into the country. This is in line with Kenya’s long-term development plan dubbed “Vision 2030”, which hopes to secure the country’s middle-income status, based on a vibrant and globally competitive financial sector. The Kenya Government hopes to establish a regional financial hub to encourage major economic growth and to position Kenya as a prime financial centre in East and Central Africa. A key milestone in these efforts is the coming into force of the Nairobi International Financial Centre Act (the Act) on 16th August, 2017. The Act seeks to provide the legal framework for the development of an efficient and globally competitive financial services sector in Kenya.

A financial centre is a location that is home to a cluster of national or international financial service providers such as banks, investment managers, hedge-funds or stock exchanges. Such a centre is usually modeled by harmonising various regulations and laws that affect a business, for example Company Law, Trust Law, Insurance Law, as well as Banking and Tax regulations, with a view of attracting investors. The measures put into place have to be tax-efficient when compared to those established in other countries in the region. International finance centres have been successful in many major cities including Frankfurt, Hong Kong, Johannesburg, London, New York, Zurich, among others. Some of the benefits usually extended to investors include attractive tax rates, encouragement to foreign investors to do business, efficiency in financial transactions and overall economic growth.

The Nairobi International Financial Centre

The Nairobi International Financial Centre (NIFC) and the Nairobi International Financial Centre Authority (the Authority) are established pursuant to sections 4 and 5 of the Act, respectively. The NIFC is an operating framework managed by the Authority to facilitate and support the development of an efficient and globally competitive financial services sector in Kenya. The Authority is established under section 5 as a body corporate, whose management vests in a Board of Directors with a non-executive chairperson, appointed by the President.


Objectives of the Authority

The main objective of the Authority is to establish and maintain an efficient operating framework to attract and retain firms to the NIFC. The Authority is also tasked to develop and recommend strategies and incentives, in collaboration with the relevant regulatory authorities, to develop Kenya as an internationally competitive financial centre. The Authority is further expected to be responsible for developing, managing and enforcing the regulatory environment, based on the principles of efficiency, transparency and integrity.


Certification of Firms
Under section 28 of the Act, a person who intends to operate a NIFC firm is required to apply to the Authority in the prescribed form to be certified. The application should be accompanied by the prescribed fee and any other additional information as the Authority may require. Once certified, the firm may conduct any business which the Cabinet Secretary responsible for matters relating to finance (the Cabinet Secretary) may designate in the Gazette as a qualified activity. In a bid to regulate those who engage in the qualified activities, the Act makes it an offence for a person to conduct any qualified activity as a NIFC firm or hold itself out as such, unless that person is duly certified by the Authority under the Act. A person who contravenes this provision of the Act commits an offence and is liable on conviction to a fine not exceeding KES 10 million (USD 100,000) or to imprisonment for a term not exceeding five (5) years or to both.


Confidentiality of Information

Under section 17 of the Act, a director, officer, employee or agent of the Authority or any person who for any reason has access to any record, document, material or information relating to the affairs of the Authority shall not divulge and or publish such information, unless it is required to be disclosed under any law or by Court order. A person who contravenes this provision of the Act commits an offence and is liable on conviction to a fine not exceeding KES 200,000 (USD 2,000) or to imprisonment for a term not exceeding three (3) years or to both.


Foreign Ownership

In a move that would be attractive to foreign investors, the Act allows NIFC firms to be fully owned by persons who are not nationals, or resident in, Kenya. This is amended though section 32 of the Act, which provides that NIFC firms shall not be subject to any nationalisation or expropriation measures or any restrictions on private ownership.


Repatriation of Profits

The legal framework which is modelled closely after Qatar’s Financial Centre allows firms to have the freedom to repatriate profits and realise investments without any restrictions. This is also geared towards attracting foreign investors. The firms will also have the freedom to recruit and employ staff of their choice, on such terms agreeable to them, subject to work permit provisions and any international treaty obligations, entered into by the Government, in respect of the terms of employment. This is strategic since the firms will be in a position to employ expatriates from other jurisdictions to help in their management, although it may be argued that this may not help in the transfer of knowledge and such valuable skills to Kenyans.


The Steering Council

The Steering Council (the Council) which is established under section 19 of the Act consists of the President as the Chair, the Deputy President as the Vice Chair, the Cabinet Secretary, the Attorney General, the Governor of the Central Bank of Kenya, the Chief Executive Officer of the Capital Markets Authority, the Chief Executive Officer of the Insurance Regulatory Authority, the Chief Executive Officer of the Retirements Benefits Authority and the Chairperson of the Authority.


The Council has the mandate to review the progress of the NIFC, provide direction and address any challenges in the development of the NIFC and the overall financial services sector in Kenya. It may from time to time, give such directions to any person as the Council considers necessary, in order to achieve the objectives of the Act.


Dispute Resolution

In a bid to establish a world-class legal environment, the Act has embraced Alternative Dispute Resolution (ADR) as a mode of resolving disputes through the establishment of the Financial Centre Tribunal (the Tribunal). The main objective for the Tribunal is to avoid the high costs of litigation which have become prohibitive, making parties to commercial transactions keen on procedures of resolving disputes which are more affordable, quicker and which maintain parties’ confidentiality. Under section 35(7) of the Act the Tribunal has jurisdiction to hear and determine appeals against any decision or order of the Authority.



The Cabinet Secretary is expected to come up with regulations for the operationalisation of the Act. In doing this, the Cabinet Secretary is expected to designate qualified activities to be conducted by NIFC firms, determine any benefits, exceptions and incentives available to the firms, determine the general conditions of entry of firms to the NIFC, provide the certification process and to prescribe information required of the firms to facilitate operationalisation of the Act.


Whether or not the NIFC will be an attractive and competitive financial hub in the region remains to be seen and will depend on a number of factors, including the provision of effective business infrastructure, innovation, a balanced regulatory environment, attractive tax incentives, an effective legal system and dispute resolution mechanisms that provide cost-effective and expeditious resolution of all business disputes. Plus, the Government’s willingness to adopt international best practices from other successful international financial institutions.


It is only through careful consideration of such issues that the NIFC will offer a lucrative base for investors to base their operations in Nairobi. The commencement of the Act is only the beginning of the journey towards making Nairobi a financial hub. A lot more will, however, need to be done for the Act to fully achieve its objectives.