Islamic Finance is increasingly being presented as more than an alternative banking model, with Premier Bank Kenya’s Head of Shariah Department Sheikh Maulid Makokha saying its principles promote responsible investment, social welfare, environmental protection and good governance.
Speaking during a Radio Generation interview on Tuesday, Makokha said the values that guide Islamic Finance closely match the Environmental, Social and Governance (ESG) principles now being used to assess how financial institutions and businesses conduct their activities.
He said Islamic Finance should be viewed as a wider financial system based on Shariah principles, rather than simply another way of running a bank.
“Therefore, as we see today's discussion revolving around the future of ethical finance, this word ethical actually we need to also clarify to our customers because it is one of the major elements, major features that distinguish between Islamic finance and conventional finance,” Makokha said.
Makokha explained that ethical finance looks at how financial decisions affect the environment, society and the way institutions are managed.
“Number one, how do we protect the environment in all our financial activities that we do? Then number two, the society itself. How are our financial services fostering the betterment of the society? Then number three is the governance structure that we have in our institutions. These are what we call the ESGs, the environmental, social, and governance elements,” he said.
According to Makokha, the three areas have become common in current discussions about responsible business and finance, but the ideas behind them have long been part of Islamic Finance.
“When you look at these three elements, actually they form part of the ethical nature of an institution, more so a financial institution. But now, when you go back to Islamic finance, these things already existed,” he said.
He said the principles date back more than 1,400 years, long before ESG became a widely used term in the modern financial sector.
“When we look at these three things from an Islamic finance perspective, they started way back 1,400 years ago, even more. I'm just trying to compare where we are starting from.”
Makokha said justice in financial dealings is one of the key principles that has guided Islamic Finance, with the way people handle and interact over wealth being central to achieving fairness in society.
“What was the focus 1,400 years ago? It was that we focus on bringing justice to the community, and the most important thing that can bring you justice is how I interact with you in terms of my wealth,” he said.
Islamic Finance operates under Shariah, or Islamic law, and has rules that set it apart from conventional banking. These include a ban on interest, restrictions on transactions involving excessive uncertainty or speculation, and limits on investments in activities considered prohibited.
In Kenya, the Banking Act provides for returns on deposits held in institutions operating according to Islamic law, while the Central Bank of Kenya regulates and supervises the sector.
Kenya’s financial inclusion strategy also recognises Islamic Finance as part of efforts to widen the range of financial services available to the public. The strategy states that Islamic banking is supported under the Banking Act and allows profit-sharing arrangements while restricting certain activities.
The country also introduced its first Shariah-compliant Sukuk, the Sh3 billion Linzi Sukuk, in 2024 to support affordable housing.
Makokha further explained that Islamic Finance makes a distinction between support given to people in need and financing meant for genuine business activities. In commercial transactions, he said, the system allows parties to share both risks and profits.
He added that institutions operating under Shariah principles are expected to stay away from investments that could harm people, communities or the environment.
“We cannot invest in activities that destroy, number one, the environment, number two, the society,” he said, citing intoxicants and drugs among activities that Islamic Finance does not support.
Makokha said the principles are not limited to banks, noting that they can also apply to pension schemes, takaful insurance and other financial institutions.
His remarks come ahead of the Islamic Finance Forum and Dialogue organised by Radio Generation, which is scheduled for September 10, 2026, at the Radisson Blu Arboretum in Nairobi.
The forum will be held under the theme “Igniting Growth in Shariah Compliant Finance” and is expected to bring together financial institutions, small and medium-sized enterprises, investors, scholars, regulators and members of the public.
The discussions will focus on the development and potential of Islamic Finance in Kenya and East Africa, with participants expected to examine Shariah-compliant banking, financing for SMEs, investment opportunities, regulation and products such as Murabaha, Musharakah and Sukuk.