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Islamic Finance | |
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Sunday,
March 22, 2020 / 1.00PM / Bukola Akinyele for WebTV / Header Image Credit: WebTV
The Banking and Other Financial Institutions Act (BOFIA) should be
reviewed to enhance Nigeria's Islamic banking industry. Mr. Abdul-Wahab
Saadudeen the Imam of Ar Radif Foundation Central Mosque, Atere Omole Phase 2,
Lagos said this in an interview in an interview with Islamic Finance Weekly.
According
to Saadudeen the framework by regulatory bodies in
the banking and financial services industry, must take into cognizance the
principles of Islamic Finance to create an enabling environment for its growth
in Nigeria.
Speaking further he stressed that instead of providing
additional guidelines, conscious steps should be taken by the regulators to set
up separate legislations that will unlock the potentials of the Islamic
finance.
The Islamic scholar noted that over the years, the
Islamic Banking legal framework has not been reviewed to reflect the
developments taking place across the Global Non-Interest financial system.
He emphasized the need for the regulatory bodies to
increase awareness of the scope and operations of the Islamic Banking and
Finance and the Shariah Advisory Board should be involved in the process.
The Shariah Advisory Board according to him has a key
role to play in deepening the non-interest finance market, which calls for
increased collaboration between the SAB and financial regulators.
He made a strong call for a competent Sharia Advisory
Board to ensure that Islamic Banks and Financial Institutions are not exposed
to avoidable systemic risks.
The Imam noted that the nature of the
financial market and the economy was critical to the growth of Islamic Banking
in the country. "If the Nigerian macro-economic indicators are weak it will
adversely affect the industry," he said.
Looking at the Shariah principles he
said understanding the fact that Islamic Banks cannot derive value from
interest rates, then other transactions and contracts must be part of the
avenues to guarantee sustainability.
He outlined the following as the three
(3) major Islamic finance contracts:
Under Trading contracts there is the Murabaha, Istisna and Wadiah,
while the Participatory contract has the Mudarabah (covers trustee transaction)
and Musharakah, while the Supporting contract has the Rahn and Tawarruq.
The Islamic cleric stated that the three (3) served as the avenues
for Islamic banking to make profit and derive value from transactions.
"Shariah contracts and transactions provide opportunities for
profit and loss in Islamic Banking, and also brings fairness amongst the
business partners. Strengthening the basis for risk-sharing" Saadudeen
said.
Giving an overview of the development of Islamic Finance in
Nigeria, the Islamic Law expert emphasized the need for increased awareness and
orientation on the benefits of non-interest banking, which is for both Muslims
and non-Muslims.
He called for more clarity in Islamic Banking, even as there is a
need to address the religious sentiments of an "Islamization Agenda" in the
nation which is not the case as Islamic Finance seeks to boost financial
inclusion, achieve sustainable development and economic prosperity for all
Nigerians, he insists.
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