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State agencies must embrace Sharia-compliant loans

In Kenya, a nation known for its diversity, fostering financial inclusivity has been a paramount goal. The government’s efforts to provide affordable credit have given rise to several lending agencies, each dedicated to supporting distinct demographic groups and economic sectors. However, within this tapestry of inclusivity, the needs of the Muslim community have often been overlooked, despite constituting a substantial portion of Kenya’s populace.

The Muslim community forms a significant portion, accounting for 10.9 percent of the total population according to the 2019 census as per the Kenya National Bureau of Statistics (KNBS). The majority of these individuals reside in Northern and Coast regions, while a substantial presence is also felt in the bustling heart of the nation, Nairobi. Embedded within this diverse community is a spirit of entrepreneurship that can be seen in the busy urban centres across the country. This enterprising population, seeking opportunities for growth and development, would greatly benefit from the introduction of Sharia-compliant Islamic finance loan facilities. Such a move would amplify their financial choices, providing avenues for financing that align with their faith-based principles.

The introduction of these loan facilities would therefore serve as a testament to Kenya’s commitment to inclusivity as enshrined in Article 10 of the constitution, and its ability to adapt financial services to meet the diverse needs of its citizens. Kenya’s Muslim community has encountered limited access to financial products that align with their faith-based beliefs.

While the private sector has made an attempt to fill the big void, there is more to be done. Government should therefore move with speed and incorporate Sharia-compliant loan facilities within established state agencies specialised in lending such as Kenya Industrial Estates (KIE), Women Enterprise Fund, Uwezo Fund, Youth Fund, Agriculture Finance Corporation, and Kenya Development Corporation. Central to the appeal of Islamic finance are its principles of fairness, risk-sharing, and social justice.

These ideals align seamlessly with Kenya’s developmental aspirations, encouraging ethical lending practices and equitable wealth distribution. Kenya must ensure that all its citizens have access to financial opportunities. The introduction of Sharia-compliant Islamic finance loan facilities within government lending agencies represents a pragmatic and ethical stride towards achieving financial inclusion for the Muslim population.

By embracing diversity, adhering to ethical financial tenets, addressing an underserved market, fostering financial literacy, and championing entrepreneurship, Kenya can craft a more inclusive financial landscape that empowers its entire citizenry. This move not only aligns with the nation’s core values but also sets a progressive example for the region and the world at large.

The original article appeared on Business Daily, 22.08.2023

Author: Mohammed Doyo, Public Policy & development specialist.

Credits: Business Daily Africa.

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