It is obvious that traditional approaches to development that afford the Government full mandate to determine priorities and manage resource mobilisation and allocation cannot guarantee the desired outcomes.
For productivity to be enhanced and sustainable economic growth to be achieved, the Government should strategically have the private sector and development partners aligned with the defined agenda.
While there is no doubt about the impact of the sound implementation of the Big 4 agenda (food security, manufacturing, universal healthcare and housing) in terms of poverty reduction and enhancing the standard of living of Kenyans, there are bound to be challenges in mobilising the needed resources.
The ever-increasing cost of public service delivery, the inability of the Government to meet the same using generated revenues and the growing burden of public debt may adversely undermine the realisation of the well-articulated agenda.
An alternative funding source for the Big Four agenda is the Islamic Finance (IF) whose underlying philosophy, indeed, embodies socially responsible investment. For instance, manufacturing can best be facilitated through the creation of an enabling environment which includes the provision of infrastructure development, technology and innovation.
IF is value based with a moral purpose to do good. The prohibitions of interest (Riba) and indulgence in excessive speculations and gambling works in the collective well-being of the society.The sharing of risk and return forms the cornerstone of Islamic finance that seeks to ensure justice, fairness and transparency for all the stakeholders.
Islamic Finance may help address some of the funding gaps the Kenyan economic players experience, especially the government, the Small and medium enterprises (SMEs) and the corporate entities. IF plays a critical role in resource mobilisation given its importance in enhancing financial inclusion and financial markets deepening.
IF could be counted as one of the financial systems that facilitate access to affordable and innovative financing that could benefit SMEs. Given that IF requires financing to be undertaken on the basis of underlying assets, SMEs that have challenges in availing collateral could benefit from the IF funding structures that take into account the asset being financed or leased to the enterprise(s) to serve as the collateral.
The IF partnership model that links a financier with a party with skills and expertise to jointly undertake an enterprise on clearly defined terms in reference to fairness and justice within the limits of Shariah guidelines can serve to unlock a great deal of human as well as economic potential.
SMEs have been hailed as the engine of economic growth and sustainable development. We appreciate the immense contributions of the SME to poverty reduction, creation of jobs, income generation , innovation and provision of products and services. The SMEs could be counted upon to drive the implementation of the manufacturing agenda in addition to the other agendas listed under the "Big 4".
For Kenya to get it right in boosting its manufacturing capacity and be competitive, the SMEs investing in the diversification and value addition of our exports must be supported.
This support may include the creation of an enabling environment through having access to affordable credit, progressive regulations, sound policies that promotes ease of doing businesses, minimising the disincentives stemming from taxation, good infrastructure, linkages with institutions of higher learning for research and capacity development .
While some of the listed requirements could be met at minimal costs through proactive government interventions, the issue of access to credit and having good infrastructure requires synergies to be created between all the stakeholders both at the local and global level.
It is not exaggeration to say that no developing and developed countries can generate enough resources to fulfil their public service delivery budgetary requirements without having partnership with private sector support and other development partners.
According to the World Bank reports, the Sub-Saharan Africa’s infrastructure funding deficit is estimated to be in excess of $90 billion annually for the next decade, and this creates the need to explore opportunities for funding using innovative instruments and go beyond the application of debt as the major solution.
Kenya stands to gain from IF in terms of facilitating trade and investments and getting integrated into the global economy, especially the Middle East and Asia.
Mr Guleid is the executive director of the Frontier Counties Development Council