Adoption Of Micro-Takaful Will Support Nigeria's SIPs - Raheem Musa


Friday, January 22, 2021 / 1:00PM / Bukola Akinyele-Yisau for WebTV / Header Image Credit: WebTV

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Adoption of "Micro-Takaful" in Nigeria will help to support the current efforts of the Federal Government in expanding the Social Intervention Programs (SIPs) for the poor and indigent in the country said Mr. Raheem Musa, MD/CEO of Al-Hayat Microfinance Bank, during a recent discussion on Islamic microfinance.


According to Musa, "Micro-Takaful is a viable business support arrangement that could assist MSMEs. It could also provide solutions to helping the poor and salvaging the economy as it is based on mutual benefits" he said.


He insisted that the introduction of Micro-Takaful will address the high poverty rate in Nigeria and improve the social wellbeing of the citizens which are the anchors of the SIPs that include initiatives like the 'Conditional Cash Transfer', "Trader Moni" "N-Power" amongst others.


The MD/CEO of Al-Hayat Microfinance Bank said one of the sectors that are contributing to the economy is microenterprises, and they need constant support.


Microenterprises according to him, contribute to 80% of domestic employment, 50% of the local GDP, and 90% of the total number of local enterprises. 


He noted that the COVID-19 pandemic, #EndSARS protests, oil price crash, and recession affected the microenterprise sector, which prompted the government to stimulate the economy and introduce interventions.


However, despite the efforts of the government, Musa noted that Nigeria still faces many challenges as there are still unserved and underserved markets in the micro-enterprise sector. He was optimistic that Islamic finance could provide support to the underserved and the financially excluded.


Speaking further, the banker said that some of Islamic finance's goals were to reduce poverty, improve economic wellbeing, support the redistribution of wealth, and empower a larger number of citizens.


He advocated for Islamic finance products that target the poor in the area of empowerment and the stimulation of rural economies.


Speaking on entrepreneurship for women, he acknowledged the fact that women constitute 50% of Nigeria's population and almost 41% of women participate actively in the micro-enterprise sector.


According to him the Central Bank of Nigeria has done a lot of things to increase the participation of women, by providing funding support to them with guidelines in microfinance.


He added that Islam is a religion that is gender-sensitive and gives women the right to earn income and run a business within acceptable Islamic principles. Citing an instance, he said women patronize his bank, Al-Hayat microfinance bank, more than men. Musa observed that women play a critical role in the micro-finance sector.


Speaking on leasing as a form of finance under Shariah guidelines, he said Ijarah was an Islamic finance instrument for leasing, which had provisions that were acceptable to Shariah laws.


On the role of microfinance banks in improving financial inclusion in Nigeria, he called for greater awareness of products and services that microfinance banks could provide to underserved communities and markets in the country.


"Islamic finance has a lot to offer such as transparency, liquidity, and fairness and also funding and collaboration which is critical for micro-enterprises and economies to thrive," Musa said.


Making further comments on investment opportunities in non-interest microinsurance firms like Al-Hayat, he explained that the organization has an investment account for deposit and it follows the principle of Mudarabah or Wakalah. Investors bring in money and the bank serves as an agent through Wakalah to help them invest with little commission of their returns. According to him, the Mudarabah transaction is discretionary, no investor dictates where the money invested is placed as long as such placed funds are safe, and would be invested in good projects.


He also pointed out that a lot of people invest in these projects and share profit. Return, in this case, is arranged on a 60:40 sharing formula with the investor or depositor taking 60% while the bank as an agent takes 40%. 


Discussing how Al-Hayat has convinced Muslims and non-Muslims that Islamic microfinance banks are a good alternative funding option in Nigeria, particularly in Ogun state, he said, non-Muslims form a major part of their customers as they constitute 45% of their customer base and they trust the services of the bank, indeed a good number of the bank's staff are Christians who have been well-trained in Islamic finance principles.

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