Sharia Compliant Financing At The Forefront Of Supporting SMEs
Sharia-compliant financing is emerging as one of Kenya’s fastest-growing financial models, offering ethical and asset-based credit solutions to businesses traditionally underserved by mainstream lenders.
At the forefront of this shift is Almasi Financial Services Ltd, which has built a niche around Islamic finance principles to support small and medium-sized enterprises (SMEs), particularly in transport and construction.
Almasi, founded in 2021, bases its model on the Islamic leasing structure known as Ijara wa Iqtina, in which the financier retains ownership of an asset while the customer makes rental payments, eventually acquiring ownership through a separate sale contract.
The model aligns with Sharia rules, which prohibit interest-based transactions.
Unlike conventional lenders, Almasi does not levy early settlement fees or late payment penalties unless the penalty amount is directed to charity.
“We do not charge any early settlement fees or late payment penalties, except in cases where the penalty is directed entirely to charity,” said Chief Executive Officer Ismail Soliman.
The company says nearly half of its portfolio now comprises Muslim-owned businesses, reflecting growing demand for compliant financial services.
The uptake of Sharia-compliant products has been strongest in transport and construction, where many Muslim entrepreneurs have historically struggled to access credit from mainstream banks.
Almasi’s asset-focused model linking funding directly to equipment or commercial vehicles rather than relying on traditional collateral has eased the acquisition of productive assets.
“Our goal is to serve customers in Kenya who may not have access to conventional sources of funds, while reaching untapped segments of the market,” Soliman noted.
Central Bank of Kenya (CBK) data shows that Sharia-compliant finance, though still modest, is growing steadily.
As of 2024, the sector held approximately 2% of total banking assets, with around 608,000 Islamic banking accounts nationwide and net assets exceeding KSh 92 billion.
MSME lending through alternative channels is also expanding: the average MSME loan size increased from Sh 0.66 million in 2022 to Sh 0.88 million in 2024, while average loan tenors grew from 27 to 33 months, reflecting growing confidence in extended-term lending.
Academic studies reinforce the sector’s impact: SMEs with access to Islamic finance in areas like Garissa reported significant business growth, with one study recording a growth coefficient of 0.66 for women-owned SMEs benefiting from Islamic financial products. Another historical case in Eastleigh observed SME expansion of nearly 300% under Islamic microfinance frameworks between 2007 and 2013.
These figures underscore the practical value of Sharia-compliant financing beyond ethical appeal.
