Africa’s climate finance challenge is often framed as a simple shortage of capital. That diagnosis is convenient, but incomplete. Capital exists in abundance, both globally and within Africa’s own financial systems. The deeper constraint is structural: much of the available financing is not designed to match Africa’s development trajectories, climate risk profiles, or institutional realities. The problem, in other words, is not the absence of money, but the misalignment between financial instruments and the continent’s needs.
What African countries need most are financing instruments that can support long-term infrastructure, absorb risk over time, and remain politically and socially legitimate.
Green Islamic finance offers one such solution, combining environmental objectives with Shariah-compliant financial structures built around real assets, shared risk, and ethical constraints on capital use. In many African contexts, this alignment fits more naturally with development priorities than conventional green finance, particularly for infrastructure and adaptation investments anchored in long time horizons.
Islamic finance is grounded in real economic activity and limits on speculative or harmful practices. Applied to green objectives, these principles translate into financing that is well suited to climate mitigation and adaptation projects, including energy systems, water infrastructure, agriculture, transport, and resilient cities.
The Islamic finance industry is no longer peripheral. By 2025, global Islamic finance assets had reached roughly US$6 trillion, with further growth expected. At the same time, Africa faces an estimated US$100 billion annual infrastructure financing gap, now intensified by climate pressures.
Demographic trends reinforce the relevance of this sector. By 2060, more than a quarter of the world’s Muslim population is expected to live in Africa, shaping domestic demand, public trust, and the political acceptability of financial instruments. Green Islamic finance allows governments to mobilise international capital while remaining aligned with domestic values and institutional norms.
Sustainable sukuk illustrate this potential. Global issuance reached US$21.5 billion in 2025, reflecting growing investor interest in instruments linked to renewable energy, sustainable agriculture, and climate-resilient infrastructure. For African issuers, sukuk provide pathways to finance solar generation, water systems, transport corridors, and adaptation projects without relying on conventional interest-based debt.
Ethics are not decorative; they shape capital flows.
The link between Islamic finance and environmental protection is grounded in the Maqasid al-Shariah, which emphasise the protection of life, intellect, progeny, and wealth. Environmental stewardship flows directly from these objectives.
Concepts such as Khalifah (human stewardship of the Earth), Mizan (balance), and the avoidance of Israf (waste) translate into expectations about how resources should be used and preserved. Religious scholarship has increasingly applied these principles to modern environmental challenges. The 2019 ruling by the Fiqh Council of North America declaring fossil fuel investments incompatible with Islamic ethics reflects this evolution.
In practice, this ethical framework increasingly overlaps with green finance exclusion criteria. Activities long excluded under Shariah principles are now joined by heightened scrutiny of high-carbon investments. The result is convergence rather than tension between ethics and sustainability.
Green sukuk address the prohibition on riba (interest) by linking returns to assets or shared risk rather than fixed interest payments. This structure suits climate and infrastructure investments, where value is tied to long-lived physical assets.
Common models include Ijara, where investors earn lease income from assets such as wind turbines or solar plants; Wakala, in which funds are managed on behalf of investors for defined green purposes; and Istisna, used to finance infrastructure construction. These structures are well understood by Islamic investors and adaptable to climate projects.
Across Africa, these instruments are increasingly complemented by other Islamic finance tools. Green waqf structures support long-term environmental initiatives such as reforestation and watershed protection. Green takaful provides insurance against climate risks faced by farmers and small enterprises. The ARC WAQF ReTakaful Facility, launched in 2025, is a notable example, offering Shariah-compliant coverage for droughts and floods affecting African agriculture.
At the household and community level, contracts such as Murabaha are helping smallholders finance solar irrigation systems and climate-resilient inputs, underscoring that climate finance is less effective when confined to large projects alone.
Until recently, Islamic finance activity in Africa lagged behind other regions. That picture is changing. Sukuk issuance on the continent reached around US$3 billion in 2025, up sharply from just US$112 million the previous year.
Egypt’s US$2.8 billion issuance and Benin’s US$500 million sukuk in early 2026, both heavily oversubscribed, signal rising investor confidence. Nigeria has used sovereign sukuk extensively for infrastructure, even if explicitly green issuances remain limited. Algeria’s recent legal reforms point to further expansion.
These developments matter not only for volumes raised, but for how they diversify funding sources. They reduce reliance on volatile Eurobond markets and enable engagement with Gulf and Islamic institutional investors on longer-term, asset-linked terms.
Multilateral support has been central to building credibility. The Islamic Development Bank has committed to financing to climate action and in 2025 issued a €500 million green sukuk under an updated Sustainable Finance Framework, directing capital toward renewable energy and adaptation projects.
Its accreditation by the Green Climate Fund in August 2025 expanded access to global climate finance for Shariah-compliant projects across its African member states, supporting renewable energy, sustainable agriculture, urban resilience, and coastal protection.
Other mechanisms reinforce this ecosystem. The Lives and Livelihoods Fund provides concessional financing to least-developed countries, with its second phase placing greater emphasis on adaptation. Blended finance approaches integrating zakat and waqf, including emerging Green Zakat frameworks, offer pathways to mobilise philanthropic capital at scale. Technical support from UNDP, the African Development Bank, and IsDB’s Reverse Linkage Program has strengthened regulatory and market capacity.
Progress has not been frictionless. Green sukuk must satisfy both Shariah standards and environmental benchmarks, governed by different institutions and interpreted unevenly across jurisdictions. ESG expertise remains uneven, and digital market infrastructure is still developing in parts of Africa.
Efforts to harmonise standards, including joint guidance from ICMA, IsDB, and LSEG alongside forthcoming AAOIFI standards, are beginning to reduce these frictions. Technological innovations such as blockchain-enabled sukuk and sustainability-linked structures offer additional transparency, though they remain nascent for most African markets.
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