By Bernardo Vizcaino

Kenya's KCB Bank, the country's largest lender by assets, plans to offer Islamic banking products through its entire branch network, accelerating the expansion of sharia-compliant banking in east Africa's biggest economy.

The move comes after Kenya's Capital Market Authority proposed a separate regulatory framework for Islamic finance, part of a broader strategy designed to boost the country's capital markets.

KCB has received all necessary approvals to launch Islamic banking across its 182 branches in the country, chief executive Joshua Oigara said in a statement. "In the long term, the product will ... promote development in the marginalized areas of our country," Oigara said.

The lender will initially roll out Islamic banking services through seven branch centres, beginning from next month.

KCB joins Standard Chartered in offering Islamic banking services in Kenya, after the British lender launched its "Saadiq" brand in March.

Islamic finance, which follows religious principles such as bans on interest payments, accounts for roughly 2 percent of total banking business in Kenya, where Muslims make up about 15 percent of the population of 40 million.

There are currently two full-fledged Islamic banks in Kenya - Gulf African Bank and First Community Bank (FCB) - as well as Islamic banking services at several conventional lenders.

KCB, which operates across east Africa from Burundi to South Sudan, already offers Islamic banking services in Tanzania.

Islamic finance is also being developed by several other sub-Saharan countries in Africa such as Nigeria and Djibouti.

In June, Kenya's finance minister said the government would consider issuing Islamic bonds, or sukuk, after a successful debut $2 billion Eurobond.