By Benadeta Mwaura - Reporter
Kenya, June 11, 2026 - Kenya is considering the introduction of Shariah-compliant Sukuk securities as part of a broader strategy to diversify funding sources and access liquidity from the rapidly growing global Islamic finance market, Treasury Cabinet Secretary John Mbadi has announced.
The proposal was unveiled in Parliament on Wednesday, June 11, 2026, during the presentation of the 2026/27 national budget in the National Assembly, where Mbadi outlined new financing instruments aimed at expanding Kenya’s investor base and deepening 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,” Mbadi 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 markets.”
Sukuk are Islamic financial instruments structured in line with Shariah principles, which prohibit interest payments. Instead, investors earn returns derived from underlying assets or infrastructure projects linked to the securities.
Mbadi noted that the introduction of Sukuk would broaden Kenya’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.
The move comes at a time when Kenya is facing significant fiscal pressure, with the government projecting total expenditure of about KSh4.8 trillion against estimated revenues of approximately KSh3.6 trillion in the 2026/27 financial year.
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The resulting financing gap of around KSh1.2 trillion is expected to be funded through a combination of domestic borrowing, external loans, grants, and emerging financing instruments such as Sukuk.
Kenya currently relies heavily on tax revenue collected by the Kenya Revenue Authority (KRA), Treasury bills and bonds in the domestic market, and concessional external financing to support its budget.
However, rising debt servicing costs and tightening global financial conditions have increased pressure on policymakers to explore alternative funding channels that are both sustainable and attractive to a wider pool of investors.
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 development projects.
If implemented, the instrument could open access to capital pools in the Middle East and other Islamic finance hubs, where demand for Sharia-compliant investment products continues to expand.
For now, the proposal signals a strategic shift in Kenya’s fiscal financing approach, one that blends conventional borrowing with new financial instruments as the government seeks to close a widening budget gap without over-reliance on traditional debt markets.