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Islamic Finance | |
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Friday, November 27, 2020 / 1:00 PM / Bukola Akinyele-Yisau for WebTV / Header Image Credit: Ecographics
Experts and Representatives of Non-Interest Finance
Multilateral Institutions believe Nigeria has the potential to emerge the
leading hub for Islamic Finance in Sub-Saharan Africa.
This was part of the key takeaways at the IFN Nigeria On Air Forum 2020
webinar hosted in collaboration with the Nigeria Stock Exchange (NSE) to
explore "Opportunities for Islamic Finance, Banking and Investment to
Flourish in Nigeria".
Mr. Ahsan Ali Head of Islamic
Origination, Standard Chartered Bank giving an overview of recent development
in international Islamic Finance and Sukuk market.
Speaking on how the pandemic has affected Islamic
finance industry especially in relation to the Sukuk market. Ali said
Islamic finance is integrated with global conventional financial industry which
is not new to the shocks in the system. Both on the banking side as well as the
capital market on Sukuk side the pandemic did have an effect.
According to him, there was a moratorium and
restructuring on the banking side announced by the Central Bank for small and
medium-sized companies (SMEs).
In terms of the Sukuk market, he said it
flourished in January to February 2020 but from March to May 2020 there was a
global downturn in Sukuk activities, however, due to liquidity injection
by global Central Banks there was a surge in money supply which helped the Sukuk
market.
On his part, Mr. Boubakari Ake, Head of Sub Sahara
African Unit, ICD of the Islamic Development Bank Group (IsDB) stressed
the need for a realistic assessment of Islamic finance in West Africa. He
noted that it was important for Nigeria to understand the factors that
influence the attraction of Shariah-compliant capital to the
region; and what determines the flow of private equity, Sukuk funds ,
trade finance and real estate investment funds to emerging markets.
Ake said there was a budding market in Sub-Saharan
Africa, but the potential was not being properly explored despite 41%
of Africa's population being Muslims.
The banker was of the view that Islamic finance was
important for Muslims while being optional for non-Muslim.
"The market attracts more customers daily, also the
ethical nature of Islamic finance attracts more non-Muslim customers. ICD banks
in Sub-Saharan Africa are among banks with a large customer-base from the
catholic church, which shows that the there is a large market potential" the
IsDB official said.
Speaking on Nigeria, he said the country is one of the
pioneering nations that established the Islamic finance regulatory
framework in the region, while the West Africa Central Bank just followed
suit 18 months ago and launched their regulatory framework on Non-Interest
Finance on June 2018. Despite this Nigeria has only two full-fledged
Islamic banks and two others set up with an Islamic window.
According to him, in May 2020 out of N37trn of Nigerian
banks total assets, Non-Interest institutions accounted for N159bn which
was less than 2% of the total asset value of the sector.
In the stock market out of N30trn of local Nigerian
debt, the Sukuk bond market was estimated at N211bn which is 0.69% of
the total size. The Sukuk issuance has always been oversubscribed
which signifies a large demand potential.
Speaking on the role Nigeria could play in the region,
Ake said Nigeria had always been the driver of Sub-Sahara Africa in terms of
the size of the country and opportunities. He believed Nigeria could reposition
itself as the capital of Islamic finance the way Malaysia did in the Asian
region. The banking expert believed what was required was flexibility in the
interpretation of Shariah when it comes to acceptability of products and
harmonization of regulatory frameworks when it comes to regions.
He added "Africa is unique as we don't have a dominant
Muslim population, flexibility needs to be considered when it comes to adopting
non-interest finance products".
The Director, DDCAP DIFC Limited Mr. Cassim Docrat in his presentation explored the "Role of Multilateral Financial
Institutions" in both Islamic and Conventional finance.
Speaking on the multilateral institutions, Mr. Cassim
Docrat said on the IsDB website Nigeria comes out on the fourth in
terms of capital provided to the Islamic Development Bank, but in terms of
disbursement $6.9bn while the funding it has received is $1.5bn.
He said, this is an under-utilised multilateral
organization and Nigeria is one of the founding members.
According to him, less than 30% of advances from IDB
are made to African countries, ISDB has 57 members and half of them are African
countries. There is under-utilized use of capital available and the
multilateral organizations will be happy to support Nigeria's project and close
the imbalance.
Also, he informed stakeholders that the Africa Development
Bank (AfDB) has developed an Islamic finance corporation and plans to
collaborate with IsDB particularly in trade finance on the continent.
He was of the view that IsDB is a great marketing tool
for the African region for deepening non-interest finance across Africa.
Looking into the future he urged the Fintech community
in Nigeria to collaborate with Islamic finance institutions, to create
digital platforms to bridge the divide. This will help to create Islamic
banking branches all over the country driving digital services.
The goal according to him is for Nigeria to upgrade
its digital channels to get the IFN market across Asia, UAE, and the Gulf
Region.
Stakeholders at the webinar agreed on the need to
develop a strong Takaful insurance company at the regional level to
cover all sorts of financial risks.
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