Islamic Fintechs Should Adopt Simple and Affordable Products - Abdur-Rasheed Babalola

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Friday, July 02, 2021 /11:00 AM / Bukola Akinyele-Yisau / Header Image Credit: EcoGraphics

 

Islamic Fintech providers have been advised to adopt affordable, simple, and appropriate products that can serve the excluded market in Nigeria. Mr. Abdur-Rasheed Babalola, Head Takaful Advisory at Kord Capital Limited made this point while discussing "The Role of Non-Interest Finance in Closing Nigeria's Financial Inclusion Gap".

 

According to him, technology must be deployed as an enabler in a way that people will appreciate it to improve financial services. Speaking on how the Central Bank of Nigeria (CBN) can leverage Islamic finance to achieve the 94% target of financial inclusion in the country, he called on the CBN to provide incentives to financial service providers that will allow them to achieve scale.

 

He also made a strong case for the CBN to support non-interest finance institutions with tax incentives, that can boost activities in the market and attract more investors. The Islamic finance expert believed the CBN can organize capacity development sessions for practitioners to cascade research findings, that will be beneficial to them.

 

He added that CBN needs to work with EFINA (Enhancing Financial and Innovation Access) to explore the technical grounds for developing products, that will serve the excluded market. He also believed the banking regulator needs to partner with multilateral organizations for technology and skills transfer that can enhance financial inclusion.

 

Babalola said awareness of how Islamic products work is important in the country, and there is a need to research to know the needs of the people.

 

An instance is the cooperative contributory mechanism in the society that most people do which is affordable, responsive, and approaching for them. He said if Islamic financial services want to approach such markets, they must offer services that are better than what the thrift collectors offer.  Another step is distribution and the non-interest finance institution's product or services, need to leverage various channels as it is very important to make the services easier and close the financial inclusion gap.

 

On how non-interest instruments and products can be integrated into the National Financial Inclusion Strategy, Babalola stressed the need for investments in research to understand the client better and what they are used to and comfortable with.

 

He said the Mudarabah products is a partnership arrangement where one party provides capital and another provides the skills, and they the pre-agreed sharing formula.  Musharakah on the other hand is a joint venture where people contribute money in proportions that are given to all parties, and when profits are made it is shared equally.


He urged Islamic Fintechs to consider design thinking in the development of products. This must take into consideration customers needs, transaction costs, capacity building of the shariah board, as well as the ability to leverage distribution channels and create value for the market.

 


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