East Africa could unlock a major new source of funding for development by expanding Shariah-compliant finance, Somalia’s Ambassador to Kenya Jabril Ibrahim Abdulle has said, as the region looks for more money to support infrastructure, businesses, agriculture and trade.
Jabril said the scale of investment required across the region was too large for governments to depend on public funds alone, calling for financial systems that can bring private capital into productive activities.
Speaking at the Islamic Finance Forum and Dialogue Conference in Nairobi on Thursday, he said East African countries needed financing for roads, ports, airports, energy, water, housing, telecommunications, technology, agriculture and human capital.
“The question before us is therefore not simply how to increase availability of finance, which is always needed, but how to develop financial systems that can connect capitalists with productive economic activities, inclusive development, while at the same time observing Islamic Sharia compliance.”
The ambassador said Islamic finance could play a wider role in the economy by bringing together investors and entrepreneurs while supporting production, trade and infrastructure development.
Jabril argued that the sector should not be seen only through the lens of banking, but as a financing system capable of supporting businesses and major investments while meeting Sharia requirements.
The call comes at a time when the global Islamic financial services industry is recording strong growth. Data from the Islamic Financial Services Board shows that the industry’s total assets increased from Sh500.52 trillion in 2024 to Sh567.6 trillion in 2025.
Islamic banking, Sukuk and Islamic insurance make up the sector, with Islamic banking accounting for more than 70 per cent of industry assets in 2024.
Sukuk, which are financial instruments structured to comply with Islamic law, also recorded 25.6 per cent year-on-year growth in 2024, pointing to increasing demand for Shariah-compliant investment options.
Going further, Jabril said the opportunity went beyond financial services and should be tied to the growth of the halal economy.
The halal economy covers a wide range of industries, including pharmaceuticals, cosmetics, tourism, fashion, logistics and manufacturing, in addition to food.
He used Thailand as an example of a country that has developed its halal economy despite having a minority Muslim population.
Somalia’s Ambassador to Kenya also stated that the lesson for Africa in our region is very clear: the development of a halal economy is not determined simply by the size of the country's Muslim population. It's also determined by the institutions, standards, investment in technology, production capacity and access to the market.”
He said the experience showed that the size of the Muslim population alone does not determine the success of the halal sector, with institutions, technology, production capacity and access to markets also playing an important role.
Kenya has already started building its Islamic capital markets, with the country issuing its first Sukuk in July 2024.
The Sh3 billion Linzi Sukuk was introduced to finance 3,069 affordable housing units, marking a step in the use of Shariah-compliant instruments to support development projects.
Kenya’s tax laws also provide for Islamic finance arrangements.
The Income Tax Act defines an Islamic finance arrangement as a financial arrangement structured in accordance with Islamic law and recognises returns from Sukuk and other Islamic finance arrangements.
The Value Added Tax Act also recognises returns from Islamic finance arrangements and Sukuk within the tax system.
At the same time, Kenya Revenue Authority Chairman Ndiritu Muriithi said the legal provisions have created a starting point for the development of Islamic finance in the country, although more room exists to improve the framework.
Muriithi also pointed to technology as a way of opening up new forms of financing, particularly by allowing businesses to use movable assets to raise capital.
He said digital systems could help establish ownership and financial interests in assets, making it possible for businesses to use those assets when seeking funding.
The approach could benefit enterprises such as livestock businesses, where productive assets can be difficult to use within conventional financing systems.
Muriithi’s remarks came as business leaders at the conference pushed for financial institutions to develop products that respond more directly to the needs of businesses.
Eastleigh Business Community chairman Ahmed Abdullahi Yare said Islamic financial institutions needed to offer financing options that would allow businesses to grow without depending mainly on equity.
He said some Muslim-owned businesses keep their money outside the formal banking system because of concerns surrounding riba, or interest.
Yare called for financial products that would give such businesses an opportunity to participate more fully in Shariah-compliant financial institutions.
He also urged Islamic scholars, banks and business organisations to put more effort into financial education and the promotion of Islamic business ethics.
“Our problem is how we can enlighten and educate our community as to the tenets or the provisions of the Islamic business ethics. This is very important.”
Yare said stronger understanding of Islamic business principles would help communities make better use of available financial services while also encouraging ethical business practices.
He also placed Kenya-Somalia economic relations at the centre of the discussion, saying stronger cooperation between the two countries could help widen opportunities in Islamic finance.
The Eastleigh Business Community chairman also said investment partnerships, professional exchanges, sharing of knowledge and direct engagement between businesses could support the growth of the sector.
In addition, the ambassador further encouraged Kenyan financial institutions to explore the Somali market, saying the expanding economic relationship between the two countries could provide opportunities for Shariah-compliant banking and investment.
The push comes as Africa is increasingly being viewed as an emerging market for Islamic finance.
The Islamic Financial Services Board, however, has identified several challenges that could slow the sector’s expansion on the continent, including shallow Sukuk markets, limited investment choices and less-developed non-bank Islamic finance segments.
Jabril said the focus should therefore shift from simply making financing available to ensuring that the money reaches businesses and projects capable of producing wider economic benefits.
He said the real value of Islamic finance would be seen in the businesses established, employment opportunities created, infrastructure delivered and the number of people brought into the formal economy.
“Let us therefore move from financing as the end itself to as an instrument for development, from capital to productive investment, and from individual financial opportunity to a stronger economic ecosystem.”