Gov’t eyes Islamic bonds to diversify financing sources
The proposed measures would expand Kenya’s funding options and deepen the country’s capital markets.
Treasury Cabinet Secretary John Mbadi has announced plans by the government to introduce Islamic bonds (Sukuk) as part of its strategy to diversify funding sources and tap into the rapidly growing global Islamic finance market.
Presenting the 2026/27 national budget on June 11, Mbadi said the proposed measures would expand Kenya’s funding options and deepen the country’s capital markets.
“Complementing these efforts and in recognition of the growing global demand for ethical and faith-based financing, the government is considering the introduction of Sukuk instruments,” he said.
“These Sharia-compliant securities, which are structured on asset-backed or asset-based principles, will enable the government to access liquidity from Islamic finance market,” he added during the presentation in the National Assembly.
Mbadi noted that the introduction of Sukuk would expand the country’s financing options by attracting investors whose mandates require Sharia-compliant instruments, while also promoting financial inclusion and strengthening capital market development.
“This will not only expand the investor base to include investors with Sharia-compliant mandates, but also promote financial inclusion and contribute to the deepening of domestic and international capital markets,” he said.
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The measures could significantly expand access to investment capital from the Middle East and other Islamic finance hubs, where demand for Sharia-compliant investment products continues to grow.
A Sukuk bond is an Islamic finance certificate that enables governments or institutions to raise capital by granting investors partial ownership of a tangible asset, rather than issuing interest-bearing debt.
Unlike conventional bonds, Sukuk instruments are structured to comply with Islamic (Shariah) principles, which prohibit the charging or earning of interest.
The move is expected to complement the government’s efforts to bridge its budget financing gap, with the Treasury projecting total expenditure of about KSh4.8 trillion against estimated revenues of approximately KSh3.6 trillion in the 2026/27 financial year.
The introduction of Sukuk would position Kenya alongside a growing number of African and emerging economies that are increasingly turning to Islamic finance to fund infrastructure, housing, and other development projects.
Uganda recently announced plans to issue a sovereign Sukuk bond to finance 15 percent of its USD 3.16 billion Standard Gauge Railway (SGR) project. The Islamic finance instrument will help fund the 272-kilometre railway line from Malaba, on the Kenya-Uganda border, to Kampala. The project is being constructed by Turkey’s Yapı Merkezi Group.
Last year, Zanzibar issued its inaugural Sharia-compliant bond to raise funds for key infrastructure projects, including the expansion of its main airport.
