Monday, April 12, 2020 / 5:37AM / Bukola Akinyele-Yisau for WebTV /
Header Image Credit: Dinarstandard
Digitalization picked up pace during the pandemic, new products, services, new customer behaviors, and innovative business ideas have emerged worldwide, and thus new business processes.
This is having a massive impact on non-conventional banking industries and activities like Islamic finance, which thrives on non-interest transactions, ethics, and sustainability.
The finance framework called "Islamic fintech" in the literature can shortly be defined as an adjustment of financial, technological developments to Islamic finance and ethical finance.
According to the 2021 global Islamic Fintech survey report, the African region has been projected to experience a 1% growth in Islamic Fintech through the next 12 months.
Nigeria with a 200m population has limited access to data. The total assets of the country's two full-fledged Islamic banks Jaiz and Taj Bank reached N214.8 billion ($564m) at the end of 2020, or less than 1% of total banking industry assets, according to the Islamic Financial Services Board data.
The unbanked population refers to the number of adults who are qualified for banking services, but actually and constructively have no access to these services. There are considered financially excluded. According to Enhanced Financial Innovation & Access (2018), 59.4million adults are financially excluded in Nigeria.
Technology does not only transform lives but enables an equal opportunity for all. Islamic banks in Nigeria have a key role in leveraging technology to close the gap in financial inclusion.
Most Islamic banks still rely on traditional data to evaluate the creditworthiness of an individual applying for a loan as we are in the 21st century.
The role of Islamic banks today is not only to serve as a financial intermediary but to also intermediate the creation of social and economic benefits.
In enabling financial inclusion, digitization and technology should be used to find and develop innovative ways to provide affordable financing for both the unserved and underserved members of society.
Through the use of savings data, Islamic banks can promote financial literacy for their customers to empower them and provide opportunities for small-scale businesses to access funding.
It is noteworthy that Non-Interest banks like Jaiz have been supporting Islamic Fintech challenge competitions in the country, to foster innovation and provide the platform for generating solutions that can be integrated into the Islamic Finance industry.
How to Achieve Islamic Digital Banking in Nigeria
According to financial analysts, Islamic digital banking could be achieved in Nigeria in the following ways;