Tanzania Bets on Islamic Finance to Deepen Its Markets and Outpace East African Rivals

Tanzania is quietly reshaping East Africa’s financial future. While Kenya leans on innovation, Uganda pushes liberalisation, and Rwanda bets on technology, Tanzania is building its markets on something more enduring: stability, inclusion, and faith-based finance.

The country’s entry into Islamic finance marks a turning point for the East African Community (EAC), where seven of the eight member states are still struggling to mobilise long-term domestic capital. Tanzania’s debut sovereign sukuk bond and Samia Infrastructure Bond have opened a new front in the region’s race to attract sustainable investment.

A New Route to Capital

In February 2025, the Tanzanian government issued its first sovereign sukuk, a Shariah-compliant bond designed to fund infrastructure and social projects. The seven-year issue was followed by the Samia Infrastructure Bond, floated through CRDB Bank and oversubscribed by 115%, raising TSh 323 billion against a target of TSh 150 billion.

For a country where most investors traditionally rely on treasury bills and bank deposits, the appetite for ethical and faith-based instruments was revealing.

According to the Absa Africa Financial Markets Index 2025 (AFMI), Tanzania scored 53 out of 100, ranking 13th among 29 African economies. Its strength lies in macroeconomic stability (85) and market depth (50), but the real story is the diversification of products. Tanzania now joins 18 African markets offering Islamic and ESG-linked instruments, alongside Kenya, Nigeria, Mauritius, and South Africa.

East Africa’s Financial Divide

The East African Community now stretches from the Indian Ocean to the Congo River. Yet its financial development is highly uneven.

Kenya remains the region’s financial engine, leading in transparency, regulation, and product innovation. It was the first in East Africa to approve asset-backed securities, expanding structured finance options for investors.
Uganda has emerged as a reform star, liberalising its foreign exchange market and improving interbank liquidity, earning it a total AFMI score of 66, the highest in the region.
Rwanda continues to advance in fintech regulation and market modernisation through its National Fintech Strategy and Regulatory Sandbox, despite a smaller market size.
DRC, though a new EAC member, has shown interest in creating a stock exchange, signalling its intent to join the regional capital markets.
Burundi, South Sudan, and Somalia remain on the periphery, constrained by limited financial infrastructure, low investor confidence, and post-conflict economic fragility.

Against this backdrop, Tanzania’s stable and inclusive approach looks deliberate rather than cautious.

Why Islamic Finance Matters

Tanzania’s sukuk and infrastructure bonds are not just instruments; they’re signals. They mark the country’s intent to broaden participation beyond elite investors and attract new classes of capital, including Shariah-compliant funds from the Gulf, North Africa, and Southeast Asia.

Globally, the sukuk market is valued at more than $800 billion, dominated by Malaysia, Saudi Arabia, and the UAE. For Tanzania, even capturing a small fraction could reshape domestic financing.

The Revolutionary Government of Zanzibar has already followed suit, issuing its own sovereign sukuk under a quasi-sovereign framework, setting a precedent for subnational financing models in Africa.

In a region where financial markets remain shallow, Uganda’s market depth score is 45, Kenya’s 34, Rwanda’s 31, Tanzania’s. Innovation in faith-based capital provides an alternative route to growth without heavy foreign borrowing.

Stability as a Competitive Edge

Tanzania’s strength is discipline.

Its fiscal policy is cautious, inflation is moderate, and the exchange rate is relatively stable, qualities that earned it one of the continent’s top macroeconomic scores.

But that same stability can slow reform. Limited capital mobility and a conservative foreign exchange regime have kept foreign investor participation modest. The government’s challenge is to translate macro strength into liquidity, allowing markets to grow without destabilising the currency.

Still, in a volatile region, stability sells. For investors seeking predictable returns amid Kenya’s policy swings or Uganda’s reform risks, Tanzania’s slow but steady model has appeal.

The Road Ahead

Tanzania’s next move should be scaling up.

Expand sukuk and infrastructure bond issuance to cover energy, housing, and transport.
Encourage pension and insurance funds to diversify investments into Shariah-compliant products.
Develop partnerships with Rwanda and Uganda to integrate Islamic finance rules into regional capital frameworks.
Create incentives for cross-border bond listings under the African Exchanges Linkage Project.

If executed, Tanzania could position itself as East Africa’s hub for ethical and sustainable finance, a niche no other EAC country is claiming.

The Bottom Line

Kenya has innovation. Uganda has reform. Rwanda has agility.

Tanzania has stability and now, strategy.

Its foray into Islamic finance gives it something the region’s others lack: an identity. By turning faith into finance and inclusion into policy, Tanzania is showing that deep, sustainable markets can grow not just from deregulation, but from design.

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Tanzania is betting on Islamic finance to expand its capital markets and attract regional and global investors. As East Africa diversifies, its sukuk and infrastructure bonds could redefine how stability powers growth.

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Excerpt:

Tanzania’s debut sukuk and infrastructure bonds mark a bold shift toward inclusive and ethical finance. As Kenya innovates and Uganda liberalises, Tanzania is quietly building East Africa’s most stable and potentially most strategic financial market.