Tanzania to enact first Islamic finance law as Sukuk market gains global attention

He told The Citizen that the framework to formalise Islamic finance operations in the country has reached an advanced stage following several amendments to existing financial laws and regulations.

“We have already amended some of the relevant financial regulations to accommodate Islamic finance,” he said.

“A draft document specifically dedicated to Islamic financing has also been prepared. The document will be discussed in the new Parliament,” Mr Tutuba said.

Mr Tutuba said the upcoming legislation is expected to streamline oversight across banking, insurance, and capital markets — providing a unified framework for products such as Sukuk (Islamic bond), Takaful (Islamic insurance), and halal investment funds.

Once enacted, it will be the first dedicated legal instrument for Islamic finance in Tanzania, giving banks and investors long-sought clarity on tax treatment, Shariah governance, and risk-sharing models.

The move follows a year in which Tanzania’s Sukuk market drew regional and international attention.

The Absa Africa Financial Markets Index (AFMI) 2025 cites Tanzania’s sovereign sukuk and Zanzibar’s quasi-sovereign sukuk as “key milestones in diversifying Africa’s capital markets.”

Tanzania maintained an overall AFMI score of 53, ranking 13th in Africa, but the report noted that the country’s strength now lies in its product innovation.

Its market-depth score of 50 — higher than Kenya’s 34 and Uganda’s 45 — reflects growing investor interest in Shariah-compliant and ethical assets.

“The government of Zanzibar took a big step in February 2025 by launching its first sovereign Sukuk bond, a milestone in accessing Shariah-compliant capital,” the AFMI report states. “Zanzibar’s Sukuk programme further demonstrates the market’s maturity.”

From Sukuk and Takaful to halal funds and digital waqf platforms, Shariah-compliant products are moving from the fringes into the financial mainstream.

The turning point came in 2022, when KCB Bank-Tanzania launched the country’s first public Sukuk, or Islamic bond.

Since then, Tanzania has seen over 10 Sukuk issuances, including the quasi-sovereign Sukuk by the Zanzibar government in April 2025—the first by a government in East and Central Africa. CRDB followed with its Albarakah Sukuk, the largest corporate issuance to date.

This rapid financial innovation has occurred alongside multiple amendments to Tanzanian Finance Acts and the 2023 publication of Sukuk guidelines.

The central bank has also formally allowed non-interest banking windows, and the Capital Markets and Securities Authority (CMSA) has issued its own Takaful and Sukuk guidelines.

Speaking to The Citizen last month, Yusra Sukuk Company Ltd chief executive, Sheikh Mohamed Issa, said that significant gaps remain, particularly in capital markets.

“There are currently no specific rules for Islamic collective investment schemes (iCIS) or Islamic real estate investment trusts (iREITs).

That means halal funds are forced to operate under conventional frameworks, which defeats the purpose of Shariah compliance,” he stated.

The Dar es Salaam Stock Exchange (DSE) also lacks Shariah-compliant listing rules.

“This creates uncertainty for trading Sukuk, halal funds, or Shariah-screened shares,” he said. However, Sheikh Issa acknowledged that the DSE management had taken note of the matter and was working on solutions.

The absence of Shariah-compliant reporting and auditing standards within Tanzania’s legal framework also raises questions of credibility.