Tanzania positions as EAC’s Sukuk hub

Tanzania is moving to codify its first dedicated Islamic finance law at a time when its Shariah-compliant capital market is advancing from novelty to strategic asset class. With a draft framework ready for parliamentary review, authorities are seeking to consolidate disparate regulatory amendments into a unified regime that governs Islamic banking, Sukuk, Takaful and halal investment funds. This marks a deliberate attempt to align legal infrastructure with a rapidly expanding market that has already delivered multiple landmark issuances.

The mechanism is regulatory coherence. Over recent years, Tanzania has amended finance laws, allowed non-interest banking windows, introduced Sukuk guidelines and seen a series of sovereign, quasi-sovereign and corporate Sukuk deals, including the first public Sukuk in 2022 and subsequent issues by Zanzibar and leading domestic banks. Yet halal funds still operate under conventional collective-investment rules, and the Dar es Salaam Stock Exchange lacks explicit Shariah-compliant listing standards. The new law is designed to close these gaps, providing clarity on tax treatment, Shariah governance, reporting standards and risk-sharing structures.

This clarity is crucial for both domestic and international investors. Shariah-focused capital pools require predictable frameworks to scale allocations; uncertainty over whether products and listings fully comply with Islamic principles raises reputational and legal risk. A unified law can reduce that friction, enabling pension funds, insurers and cross-border investors from the Gulf and Southeast Asia to treat Tanzanian Shariah-compliant instruments as investible at scale.

Macro-signals are already visible. Tanzania’s financial-market-depth scores have improved in regional benchmarks, with particular recognition of Sukuk innovation. The growing variety of Shariah products—from sovereign and quasi-sovereign Sukuk to corporate issuance and emerging digital waqf platforms—points to an ecosystem that, with proper regulation, can support infrastructure financing, SME funding and real-estate development without relying solely on conventional debt.

For policymakers, the law is also an inclusion tool. Islamic finance can attract unbanked or underbanked populations who have previously avoided conventional products for religious reasons, expanding the deposit base and supporting broader financial intermediation. If combined with clear consumer protection and oversight, this could deepen liquidity pools and improve monetary-policy transmission.

Risks lie in implementation and capacity. Effective Shariah governance requires skilled scholars, robust audit frameworks, and harmonisation across regulators in banking, insurance and capital markets. Without sufficient supervisory depth, rapid product proliferation could outpace oversight, creating conduct or reputational risks. Tax alignment will be critical; if Sukuk and Islamic funds face heavier transaction costs than bonds or equities, the law’s benefits will be muted.

Forward indicators include: the volume and frequency of Sukuk issuance post-legislation, the share of banking assets in Islamic windows or fully-fledged Islamic banks, the launch of Shariah-compliant funds and iREITs, and the development of DSE listing standards for Shariah-screened securities. If issuance volumes continue to grow and investor participation broadens, Tanzania will consolidate its status as an Islamic-finance hub in East Africa.

Put simply, the law is not just a legal milestone; it is an attempt to convert a series of one-off innovations into a coherent asset class that can fund development, attract foreign capital and diversify Tanzania’s financial architecture.