| Islamic Finance |    1746 VIEWS  |
| Islamic Finance | |
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Friday, November 13, 2020 / 1:00 PM / Bukola Akinyele for WebTV / Header Image Credit: WebTV
Islamic Equity Financing
will unlock the growth and development of Micro, Small and Medium Enterprises,
MSMEs if adopted in Nigeria.
Mr. Shefiu Badamasi, the
Founder of Islamic Crescent Cooperative Society Limited in Abuja disclosed this
in a recent as a guest on the discourse on Non-Interest Finance in the country.
He believed that it was
time to explore how to deploy Islamic finance products for micro and medium scale
enterprises, by getting more suitable product for them which is equity
financing that will help the MSME to thrive and grow.
Speaking further he said that equity financing is
unsecured based on the moral hazard such as third party and the risk involve.
He noted that moral hazards can be mitigated by doing joint or several
guarantees by group financing in order to mitigate the risks involved.
By lifting millions of Nigerians out of
poverty, the Islamic Crescent C0-founder said there is need to use Islamic
equity financing , while government participation is key.
He also acknowledged the CBN guidelines that makes provisions for government to fully own Islamic Micro finance banks, as laudable which can be established at the state and local government level. Such provisions from his perspective can address the rising tide of poverty in the country.
Another model he highlighted for adoption is the
public private partnership approach. The PPP model will reposition the
country's microfinance institutions, to support and empower millions of
Nigerians.
The government according to him has a role to
play, even as the microfinance institutions will have to develop some products
especially based on equity financing and not debt financing.
On the side of the current size of Islamic
Microfinance in Nigeria (In terms of valuation) and what can be done to unlock
more opportunities and deepen its activities in the country, the Islamic
Microfinance expert said the current Islamic microfinance banks are still
operating the same license in a conventional way.
He stated that there is no separation in valuation
from the standpoint of the Central Bank of Nigeria as one key area to look at
is capitalization.
For Tier-One unit Microfinance banks the
capitalization is up to N200m while Tier- two unit Micro finance bank is
N50m, State level is N1bn and the National N5bn.
In the South West region, there are only two
Islamic microfinance institutions Al-Hayat and Al-Baraka Microfinance Banks,
while the North has several MFBs.
He called for a review of the guidelines and policy
for Islamic microfinance banks in order to make them vibrant and
effective.
Shefi'u Badamasi called on the CBN to
allow the market through its guidelines feel the impact of Islamic microfinance
banks. A lot can be achieved according to him if Islamic Microfinance
banks prioritize MSMEs.
Currently the CBN guidelines have identify three
major factors that are affecting conventional microfinance such as high cost of
transactions, illegality of interest and unethical investment.
Speaking on how he will assess the current
regulations developed by the CBN for MFB/OFIs. He said Nigeria assessment has
to do with the implementation of policies and the guidelines. He said,
government have not been supportive in terms of giving enough capital and
funding to finance the small scale industry or entrepreneurs.
On the side of products, he stressed the need for
Islamic Microfinance Institutions to deepen financial inclusion in
Nigeria, especially the North-West region that is predominantly Muslim, he
insisted that equity financing such as 'Mudaraba' and 'Musharaka', and micro
Islamic insurance which can insure the product/the commodity are critical for
the market.
He stressed that the Islamic microfinance
institutions need to provide micro takaful for the funding they are giving to
micro entrepreneurs.
Mr. Shefi'u Badamusi said the Islamic Crescent Co-operative
Society Limited can support through
collaborations with Islamic Finance Institutions in Nigeria.
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