Domiciliation of Private Investment Vehicles in East Africa: A Comparative Analysis of Legal and Regulatory Frameworks for Establishing Private Investment Vehicles Across East African Jurisdictions
A REPORT exploring the opportunities and challenges of domiciling investment vehicles in East African jurisdictions.
Abstract
Private capital funds, or investment vehicles (IVs) – spanning private equity, venture capital, and private debt – play a pivotal role in the region’s economic growth and job creation, especially for micro, small and medium-sized enterprises (MSMEs). Yet, fund managers and investors often face questions about where best to domicile their vehicles for optimal regulatory compliance, tax efficiency, and investor confidence. This report makes the case for localised domiciliation of funds, analysing the various elements that make East African jurisdictions worth being considered by fund managers in selecting domiciles for their investment vehicles.
The Fund Domiciliation Maturity Diagnostic Tool (FDMDT) serves as an analytical instrument intended to evaluate the appeal of African jurisdictions for fund domiciliation. The four parameters of this tool are broken down and used to evaluate the current enabling environment, judiciary framework, operational efficiency and regulatory environment to provide suggestions aimed at making East African International Finance Centres (IFCs) more suitable for domiciliation of IVs.
Drawing on case studies, this report explores the opportunities and challenges of domiciling investment vehicles in East African jurisdictions in a bid to catalyse local capital mobilisation and promote economic growth and development within the region.
Introduction
Private capital markets in East Africa are starting to pick up significant traction. With an increase in the number of funds raising capital, foreign direct investment (FDI), and the number of private capital deals within the region, East Africa is becoming increasingly appealing to investment funds. The heightened attractiveness demands an understanding of each country's regulatory environment, tax efficiency and political and economic stability when deciding where to domicile.
Fund domiciliation refers to the legal jurisdiction of which an IV is legally incorporated and is typically where the administration and management of the fund take place. An investment vehicle is a financial product such as stocks and bonds or instruments like mutual funds and are used by investors to gain positive returns on their money. Managers seek to match the complementarities between specific regulatory regimes, tax efficiencies, investor preferences and market access opportunities when selecting a suitable domicile that aligns with their strategy. Some jurisdictions like Luxembourg, Ireland and African neighbour Mauritius have gained prominence as domiciles due to a combination of investor-friendly regulations, perceived political stability and favourable tax regimes.
Being an attractive region for domiciliation bodes well for jurisdictions which host their funds. Local IVs are better positioned to source and channel capital into local businesses. By bringing IVs closer to pipelines of investable opportunities, domiciliation provides legal structures that better respond to the needs of both IVs and micro, small, and medium-sized enterprises (MSMEs) thus developing private capital markets in the region. Rwanda has long had favourable investment policies, which have attracted both venture capital and private equity. The Kigali International Financial Centre (KIFC) serves as an example of a centre that is accelerating the development of the ecosystem, while the political turmoil of the Tigray region in Ethiopia hinders the country's appeal to investment funds. Clearly, there are variant conditions within the region’s states which must be thoroughly examined before a decision to domicile is made. Clearly, there are variant conditions within the region’s states which must be thoroughly examined before a decision to domicile is made.
Creating conditions conducive for domiciliation in East Africa is important in driving growth and employment through attracting capital. MSMEs play a vital role in fostering private sector growth and economic opportunities, However, the limited access to funding presents challenges for African entrepreneurs, making it hard to find affordable financing and hindering the initiation, growth, and scaling of promising businesses.
This report aims to provide a comprehensive analysis of East Africa’s potential as a domicile for IVs - and offer actionable insights into how regulatory, tax and stability factors shape these decisions. By benchmarking East African jurisdictions against established global domiciles, the report seeks to identify best practices, highlight challenges, and recommend reforms intended to catalyse local capital mobilisation, attract foreign investment, and ultimately promote economic growth throughout the region.
Methodology
This report employs a mixed-methods approach, combining desk research and comparative analysis to assess the domiciliation of IVs in East Africa. The research relies on secondary data sources, including policy documents, regulatory frameworks, tax codes, and financial market reports from national investment authorities and international financial organisations such as World Bank and the International Finance Corporation (IFC). Additionally, industry reports and academic literature provide insights into global best practices for fund domiciliation.
A core analytical framework used in this study is the Fund Domiciliation Maturity Diagnostic Tool (FDMDT) developed by Mastercard, which benchmarks jurisdictions based on regulatory environment, tax efficiency, investor protection, governance structures, operational infrastructure, and political and economic stability. The FDMDT facilitates a structured evaluation of East African jurisdictions against leading global domiciles, such as Luxembourg, Ireland, and Mauritius, highlighting strengths and gaps in the region’s investment landscape.
Furthermore, the study incorporates case study analysis, examining the experiences of key financial hubs across East Africa such as Rwanda’s Kigali International Financial Centre (KIFC) and Kenya's Nairobi International Financial Centre (NIFC), contrasting them with jurisdictions facing challenges, such as Ethiopia. These case studies offer practical insights into how policy environments shape fund domiciliation decisions. To enhance robustness, the study cross-references multiple data sources, including market reports, legal analyses, and investment trends from development finance institutions, fund managers, and investment advisory firms. This triangulated approach ensures a comprehensive, evidence-based assessment of East Africa’s suitability as a domicile for IVs.
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