Kigali presents compelling case as a financial centre – Jersey Finance CEO

Joe Moynihan, Chief Executive Officer of Jersey Finance – one of the world’s leading international financial centres (IFCs), has said that using Kigali as a hub to establish a fund that invests in East Africa or beyond presents a compelling case for many reasons. Moynihan, who also chairs the World Alliance of International Finance Centers (WAIFC), said that newer financial centers have the advantage of designing robust regulatory frameworks from the outset, avoiding legacy issues that could later harm their reputation. This ability to start fresh, combined with the growth of local wealth, he said, makes newer IFCs particularly appealing. On the sidelines of the just-concluded Inclusive FinTech Forum in Kigali, Moynihan spoke exclusively to The New Times’ Business Editor, Julius Bizimungu, about how Africa can build strong financial centres. Below are excerpts; How relevant are IFCs today compared to the 1960s when the concept emerged. I think we've become more sophisticated. If you step back and ask, what is an international finance center (IFC) supposed to do? At its core, it should provide a stable platform for global investors – ideally, a tax-neutral one. If I live in a country where I'm liable for tax on my income, that obligation remains. However, if I want to set up a structure to invest in another country, an IFC offers a tax-neutral platform. We don’t tax the structure itself. If that company or fund invests in property in a particular region where taxes are due, those taxes should still be paid – but we don’t add an extra layer on top. Our revenue comes from taxing the businesses that provide financial services – banks, trust companies, and fund managers – not the underlying entity. This ensures that when investors from multiple countries pool funds into a project, they don’t face additional taxation at the IFC level. Regulation is also tailored to the type of investor. If you're selling shares and funds to everyday retail investors who are putting in a few thousand pounds, strong regulatory protections are necessary to prevent significant financial losses. However, if the IFC primarily serves high-net-worth investors – those committing half a million pounds or more – it's a different landscape. These sophisticated investors have access to professional advice, understand the risks, and don’t require the same level of regulatory safeguards. Ultimately, an effective IFC must be tax-neutral, easy to operate, and cost-efficient. Setting up financial structures is already expensive, so the framework must support seamless business operations. But to truly succeed, you also need the right talent to execute. I think that element of neutrality is historically why most investors have preferred to organise their investments through IFCs. To what extent do investors today still want to organise their investments through IFCs? From an investor point of view, I don't think tax is quite what it was in the past. What investors are more interested in is how efficient is it? How cost-effective is it? On a personal level, if I invest in a fund and earn returns, I’m required to pay tax. With common reporting standards and automatic information exchange between countries, the days of discreet offshore accounts are long gone. Decades ago, you could earn interest on a bank account, and it was up to you whether to declare it. Now, tax authorities automatically receive that information, ensuring compliance. The opportunity for tax abuse, if you like, is long gone. What we're more interested in is a top-quality business. For us, if the structure is complicated, there might be an advantage from a tax point of view. But that's not the key driver. The other thing for us as a centre is we do a lot of private wealth business. Our private wealth business, a lot of it comes from countries where there's no tax anyway. What they're more interested in is, are my assets being managed in a good quality jurisdiction, with people who know what they're doing, with enough regulation for me to take comfort that the guys are bigger than our crooks. One of the big things for us is, what's the inheritance position? What happens if I die? We have a lot of trust business where the assets are all held in trust and there are clear instructions to the trustees. If anything happens to me, here's how you split it all up. And so, inheritance planning is really, really important. What would not have been quite an issue a number of years ago has become a much bigger issue now because people are better educated, they're more sophisticated. They want to make sure there aren't any problems after they leave. You seem to confirm that investors still want to organise their investments through IFCs. To what extent would you say that is happening today? I think an investor is a different type of customer now because the deal sizes are bigger, and the investments are bigger. Because of the quality of regulation, the corporate governance is much higher than it was. For us as a jurisdiction, we've seen our customer base growing across the board. The customer base is bigger. Your average client has a lot more wealth than they might have had 20 years ago. For ultra-high-net-worth families, wealth creation often happens in one jurisdiction, but their investments are spread globally. Our role is to structure and manage these assets efficiently. For example, a client investing in London real estate might use a Jersey company to facilitate the purchase. A yacht in the South of France could be owned through another entity, all held under a foundation or trust. Our expertise lies in structuring these holdings to ensure seamless asset management. A lot of African countries are trying to become IFCs. What could explain this kind of trend? I think part of it is the fact that there is more wealth, more generally. That, in itself, presents both opportunities and challenges. Another major driver is the need for job creation, particularly for young people. The financial services industry, if properly developed, has the potential to create significant employment, which in turn boosts economic growth and local spending. Establishing an international finance centre (IFC) is also a way to attract investment into the jurisdiction. While I’m not familiar with the specific business models of other centers, in general, investors tend to be drawn to specialised opportunities, which vary widely from one IFC to another. Many traditional IFCs are facing increasing pressure due to evolving global regulations. In contrast, newer financial centers have the advantage of designing robust regulatory frameworks from the outset, avoiding legacy issues that could later harm their reputation. This ability to start fresh, combined with the growth of local wealth, makes newer IFCs particularly appealing. Is there a great deal of evidence which suggests that countries that have become IFCs or established themselves as IFCs, have improved the living standards of their people or grown their economy substantially? I haven't done a lot of research on this, but anecdotally, yes. If the centres grow, they will have an impact on the local economy. They provide employment and then they provide secondary economic benefit. If you start to build an international finance centre and it becomes successful, you're going to have investors coming in. That helps your hospitality industry, and your employees will be earning money from which they will pay tax, which is more money to the government. If you think about it in a broad way, if international investors come in, they'll be running events, they'll need taxis, they'll need restaurants, they'll need hotels. It all has a knock-on effect on the broader economy. Financial services often provide half or more of IFC's economies. What kind of sectors of economy are well positioned today to benefit more from IFCs? I think it depends. Within the finance centre, I think probably the opportunity here is going to be the funds area. Using Kigali as a hub to establish a fund that invests in East Africa or beyond presents a compelling case for many reasons. I was talking to somebody today who set up one of their funds in Morocco and they generally deal with international investors. However, because they were based there, they also attracted significant investment from wealthy Moroccan individuals into their fund. This local presence can be a key advantage. Now, the challenge is to take stock of the building blocks already in place and ask: What is our USP [unique selling point]? What sets us apart? Why are we the more attractive option? One of the biggest factors is stability – something that is absolutely critical for international investors. Stability, what do you mean by that? That tomorrow, somebody in the government isn't going to change the rules. Either in terms of what your fund is doing or fundamentals on the economy that could have an impact. Years ago, we often highlighted Jersey's stability, both economic and political, as a key advantage. Investors knew that by structuring their investments through Jersey, they had certainty of outcomes, without the risk of sudden regulatory shifts in a few years. Back then, this was mainly a comparison to developing economies like those in the GCC [Gulf Cooperation Council] or Africa, where policy unpredictability was a common concern. But now, look at what's happening in the UK and the US. Governments change, and with each transition, policies are overturned, creating instability. It makes you reconsider what true stability really means.

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Kigali presents compelling case as a financial centre – Jersey Finance CEO