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ECOSYSTEM:  Kenya’s Islamic finance sector continues to experience slow growth despite efforts to promote it, lagging behind neighbouring countries like Tanzania, which has a thriving Islamic financial ecosystem due to its favourable legal frameworks.

Capital Markets Authority (CMA) Chairman, Ugas Sheikh-Mohammed, said it is policies and regulatory frameworks that will strengthen Kenya’s Islamic finance sector.

He compared Kenya’s situation to that of Tanzania and Uganda, which, despite lacking formal frameworks, have successfully created a marketplace for Islamic finance products. “Some regions have regulations but no products, while others lack regulations but have a thriving market. Are regulations the obstacle? That’s the key question we need to ask ourselves,” said Ugas at the launch of an Islamic finance book.

To boost Islamic finance in Kenya, the CMA unveiled a Q&A Islamic Finance book, a collaborative initiative with Salihin Advisory. The book aims to promote inclusivity and create awareness within the financial sector.

According to Ugas, the Islamic finance book provides clarity on principles and practices that align with Kenyan laws and regulations. It also incorporates global best practices in Islamic finance that have proven effective in other regions.

“We need to increase exposure to Islamic financing in Kenya. It’s a serious challenge, and that’s why we must unlock new avenues. The Islamic finance book is an essential tool for raising awareness, especially among SMEs and sectors at the grassroots level,” he added.

Islamic finance

The book is expected to be instrumental in building understanding and confidence in Islamic finance, contributing to the sector’s long-term growth and development in Kenya. Capital Markets Authority (CMA) CEO, Wycliffe Shamiah, however, noted progress in Kenya’s Islamic finance sector, pointing to the listing of the Linzi Sukuk bond.

“We are working with financial sector regulators to establish a legal framework that will increase trust and provide investor protection,” he said.

Speaking at the launch of an Islamic finance book, Sheikh Ibrahim Lethome, noted that Kenya has now introduced several Sharia-compliant financial products in pension funds, commercial banks, insurance, Saccos, and the recently listed Sukuk bond, all of which are vital for driving economic growth.