Islamic Finance | |
Islamic Finance | |
3810 VIEWS | |
![]() |
Wednesday, January 15, 2020 / 5:21 PM /
Bukola Akinyele for WebTV / Header Image Credit:
WebTV recently interviewed
Dr. Aliyu Dahiru, the Deputy Director, Training and Linkages, the International
Islamic Banking and Finance Institute, Bayero University Kano, and was requested to give his
perspectives on what will shape developments in the Islamic Finance market for
the year 2020. Excerpts of the interview appear below:
Islamic Finance Global
Outlook
According
to Dr. Dahiru, the year 2020 may appear to be relatively good for Islamic
finance in terms of continuous growth and support for the real sector and
infrastructure. Though, according to the recent S&P Global rating of the
industry, the last two years recorded a marginal increase at a global level.
For instance, he noted that in 2018 the Islamic Finance market increased
by only 2% as compared to 10% in the preceding year of 2017.
Focus on Nigeria
Looking at the development of the Islamic Finance market in Nigeria, one
major way Dahiru believed the industry could support the country is in the area
of financial inclusion.
With Nigeria's target of achieving 80% adult financial inclusion set for
2020, Islamic Finance could go a long way to scale up inclusion from the
informal to the formal sector, especially in the North-West and North-East
regions of the country that account for the highest exclusion levels.
He said with the emergence of Islamic banks, and other Non-Interest
Finance Institutions should go a long way in addressing financial exclusion in
the regions and see to the provision of finance and capital to small
businesses, thereby deepening regional economic activities.
Looking at the Federal Government's 2020 Budget, which seeks, among
other things, to strengthen economic growth and create jobs while uplifting
millions of Nigerians from poverty, the achievement of the goals would require
robust financing.
He believed that Islamic Finance was a stable financial architecture
that could ensure linkage between the real sector of the economy and finance,
focusing on sectors that could drive a rise in productive output.
Dahiru was optimistic that the increasing
participation of regulators, Islamic banks and mutual funds in some Islamic
Financial Institutions such as the Islamic Financial Services Board, will
attract investors into the country and strengthen the operations of the
existing institutions.
He
stressed the need for the development of studies in Islamic Finance to build
capacity and expertise in the specialty.
"There
is no systematic support at the moment for institutions that train market
players. I think this is very important. The regulators and other stakeholders
should pay attention to that; otherwise, the practice may not be a desirable
one," Dahiru said.
Issuance Of Third Sukuk
On
the ongoing discussions and plans to issue a Third Sukuk bond in Nigeria,
Dahiru described it as a welcome development.
He
said for robustness, depth and breadth of the market, private investors,
corporations and state governments will have to issue quasi-sovereign Sukuk to
complement government's effort.
Speaking
further, the Islamic Finance studies scholar called on the 36 states of the
federation and Abuja to each should identify a viable project that Sukuk can
finance and issue it.
"Now
that we have the benchmark of the FGN Sukuk, things could be easy, unlike
before where there was none or only that of Osun Sukuk; we have broader 'templates'. You see, every time the FGN issued Sukuk, it was oversubscribed.
That tells a lot about its potential. More so, there are a lot of Ponzi scheme
investors that are likely to revert to genuine investment opportunities if
provided credible investment options," Dahiru said.
Dahiru
argued that it was not enough for the FGN to issue Sukuk in one sector only; he
highlighted other sectors such as railways, airports, housing, the electricity
sector that Sukuk could finance.
He
noted that financing the federal government budget with foreign borrowing tied
to high-interest rates is becoming unbearable and may lead to a debt overhang.
The
academician cautioned the federal government to watch its steps and limit
excessive borrowing with interest. It should also encourage state governments
and corporations to use more public-private partnerships, especially structured
around non-interest arrangements.
Prospects for More Takaful Licenses
On the prospects of having more
Takaful companies licensed in 2020, Dahiru said the regulator National
Insurance Commission, NAICOM has hinted on several licenses that are undergoing
processing.
He
admitted that Non-Interest finance institutions exceed dozens, which is a good
development in a country like Nigeria.
Dr.
Dahiru acknowledged that the size of the total asset is still small but is
gradually growing. He noted that recently, Taj Bank, the second full-fledged
Islamic bank commenced operations while Salam Takaful Insurance has also taken
off and believed more are coming on board.
The Visit Of the President of the Islamic Development Bank
Looking at the proposed visit of the Islamic
Development Bank President to Nigeria, Dr. Dahiru said the Federal Government
should make favourable policies to accommodate more interventions from the IDB.
He said Nigeria was the 6th largest
investor but was not tapping fully into the IDB borrowing opportunity.
Sectors like education, electricity, youth empowerment
and housing finance could pass through the IDB, and such issues could be tabled
and discussions held during the IDB President's visit. He believed
through speedy action of the government; a few projects could reach
completion.
Capital Market Support
In speaking on the role, the local capital market
could play in deepening the Islamic Finance business, Dahiru acknowledged the
commitment of the Securities and Exchange Commission (SEC) that has made
provision in its capital market master plan to increase the market share of
Islamic finance by 25%.
He urged regulators in the capital market to make
efforts to implement the market development masterplan.
Related News
1. How Takaful Will Deepen Insurance Industry In 2020 -
Ekerete Ola-Gam Ikon
2. Islamic Finance, A Key Tool For Development Financing
In Nigeria - Dr. Jubril Salaudeen
3. Financing Nigeria's Infrastructure Deficit:
Opportunities In The Finance Market - Toyin Sanni
4. 2019 Review of Developments In Islamic Finance In
Nigeria
5. Adoption of Shariah-Compliant Finance Solutions Will
Bring Transformation To Nigeria's Economy
6. Islamic Finance Global Asset Projected To Reach
$3.8trn By 2023 - Tajudeen Sekoni
7. How The NSE Promotes Investor Education in
Non-Interest Finance - Jude Chiemeka
8. How Islamic Finance Supports Nigeria's Sustainable
Development Goals-HRH Muhammadu Sanusi II
9. Measuring The Prospects For Sukuk and Infrastructure
Financing In Nigeria
10. How The Capital Market Supports Non-Interest Finance
In Nigeria
11. Standardization and Awareness, Key To the Growth Of
Islamic Finance In Nigeria - Banji Fehintola
12. AFN To Participate In African Islamic Fintech Summit
on 29th and 30th, November 2019 In Senegal
13. Islamic Finance: Women Can Run Businesses That Are
Sharia Compliant - Dr. Tajudeen Yusuf
14. How Islamic Finance Can Deepen Financial Inclusion In
Nigeria - Hassan Usman, MD, Jaiz Bank
15. Stakeholders At AICIF 2019 Urge For Expansion of
Sukuk, Waqf and Takaful
16. Sanusi Calls For Robust Regulatory and Legal
Framework To Deepen Non-Interest Finance In Nigeria
17. African International Conference On Islamic Finance
To Hold On 4th and 5th November 2019 In Lagos
18. Sukuk Bonds Can Address The Infrastructure and
Housing Deficits In Nigeria - Dr. Aliyu Dahiru