African states are increasingly turning to sukuk—sharia-compliant bonds backed by tangible assets—to diversify their funding sources as global interest rates rise and traditional concessional financing becomes harder to secure. With the African Development Bank (BAD) reporting the continent’s debt service reached 163 billion dollars in 2024, these instruments offer a way to access capital from Gulf and Asian markets. This shift represents a move toward non-speculative, real-economy financing, with countries like Benin already scheduling a 500 million dollar issuance for early 2026.
Why are African nations adopting sukuk?
For decades, African nations relied on a stable mix of multilateral aid, eurobonds, and regional markets. According to Maxime Dossa, a consultant in Islamic finance, that model is under pressure as traditional lenders struggle to meet the scale of financing needs. By issuing sukuk, states can tap into a vast pool of Gulf and Asian sovereign wealth funds that require investments compatible with Islamic finance principles. Unlike conventional bonds, sukuk are tied to real-world assets, such as energy projects or toll roads, which aligns with the needs of African economies for concrete development funding.
The global Islamic finance market has grown to approximately 6,000 billion dollars in assets over the last decade, yet Africa remains a marginal player, with Islamic banking assets accounting for less than 10% of the continental banking system, according to the African Development Bank (BAD).
What are the main barriers to market growth?
Despite the potential, the market remains fragmented and technically challenging. Anouar Hassoune, director general of GCR West Africa, notes that sukuk are often misunderstood, requiring significant educational efforts for both issuers and investors. Because these instruments function as securitization operations, countries must establish specific legal and regulatory frameworks before they can be effectively deployed. Additionally, there is a noted shortage of human resources with the technical expertise required to structure these complex financial products.
The transition to sukuk is more than a simple search for liquidity; it is a structural adjustment. While conventional bonds limit an issuer to traditional investor bases, sukuk act as a bridge, allowing governments to attract both conventional and Islamic capital. This dual-access model is likely to become a standard strategy for sub-sovereign and sovereign entities looking to bypass the limitations of current credit markets.
What is the expected outlook for African Islamic finance?
The involvement of major international players suggests a trend toward institutionalization. In 2025, the International Finance Corporation (IFC) increased its participation in the sector by partnering with local banks to develop Islamic financing in sub-Saharan Africa. Analysts expect that if political commitment remains high and regulatory frameworks for securitization are solidified, sukuk could evolve from a niche alternative into a primary engine for continental development. Mouctar Oumarou, director general of Savana Islamic Finance, emphasizes that the long-term success of this market depends on the ability of local actors to consistently structure bankable, large-scale projects.
Frequently Asked Questions
What is the difference between a conventional bond and a sukuk?
Conventional bonds are debt instruments, whereas sukuk are structured around tangible assets and real economic flows, avoiding speculative practices according to Maxime Dossa.
Are sukuk only for Muslim investors?
No. According to Anouar Hassoune, sukuk are open to all investors and serve as a tool to diversify funding sources by appealing to both conventional and Islamic financial markets.
Why is the IFC involved in this market?
The IFC is engaging in Islamic finance to help expand access to funding for micro, small, and medium-sized enterprises (MPME) and to promote sustainable, inclusive growth in regions like Senegal, as noted by its representatives.
Could the adoption of sukuk fundamentally change how African infrastructure projects are financed over the next decade?
