Friday, January 01, 2021/ 1:00 PM / Bukola Akinyele-Yisau for
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The Islamic finance market had a sober year in 2020. Despite the challenges occasioned by the novel coronavirus pandemic, non-interest banking activities stepped up modestly during the year with a variety of instruments providing fit-for-purpose solutions to business needs. Islamic scholars and financial market analysts have expressed the need for the government to prompt stronger growth stimulus and development.
Dr Aliyu Dahiru Muhammad, Senior Lecturer at the Department of Economics and Deputy Director (Training and Linkages) at the International Institute of Islamic Banking and Finance, Bayero University, recently provided some perspective on the year 2020 and his 2021 outlook for the Islamic finance market.
Muhammad noted that the year 2020 came with a lot of challenges that affected key sectors of the economy including non-interest banking. He said that Q1, 2020 saw the unprecedented COVID-19 pandemic hit global markets which led to the closure of businesses and borders in places like Nigeria.
He said the effect of COVID 19 on Islamic finance was comparable to that of the conventional finance segment of the economy. In essence he noted that the pandemic affected the operations of the financial institutions (which applied to non-interest banking).
The scholar added that the government interventions for which the non-interest finance institutions benefitted from helped in supporting a steady pathway to reviving and protecting the economy.
Sharing his perspective on the Islamic Development Bank (IsDB) response measures and support for OIC Member Countries affected by COVID-19. he said, the IsDB initiative was anchored on 3Rs which covered; respond, restore and restart. This involved the following:
He lauded the efforts of the Islamic Development Bank (IsDB) across OIC states. Dr. Muhammad urged the IsDB to work with stakeholders and governments to align national policies which is in line with shariah expectations.
Muhammad speaking on the most significant activities that occurred in the Nigerian non-interest finance market in 2020, identified the signing of the BOFIA Act 2020 by President Muhammadu Buhari as a positive development.
He said by signing the BOFIA ACT 2020 into law Islamic Finance has come to stay in Nigeria and will help to deepen financial inclusion for people who were excluded. He was optimistic that it would lead to more activities in the non-interest finance space.
The Deputy Director Training and Linkages of the International Institute of Islamic Banking and Finance, Bayero University, Kano looked at the challenges facing the growth of Islamic finance in Nigeria, noting the need for increased sensitization and awareness to improve upon the 2020 performance in 2021.
He said, in terms of awareness and capacity building the IIIBF engaged the CBN through a collaboration with the International Centre for Islamic Culture Education, Abuja (ICICE) conducting two trainings which is mainly for regulators where half of the participants were Muslims and the others non-Muslims.
The Islamic finance scholar projected that the creation of more awareness and trainings will continue in 2021 and beyond for people to achieve better understanding and explore the opportunities in the alternative finance market.
On key developments that would shape the non-interest finance industry in 2021, he noted that amidst the COVID-19 pandemic, the 3rd Sukuk Issuance was oversubscribed by 400% showing that investors were interested in the instrument.
"More companies are being established for equity financing, equity management using shariah compliant facilities and also we are seeing a lot of developments in Islamic finance globally" he said.
Dr Muhammad shared his thoughts on the COVID-19 second wave and its implications for the non-interest finance industry, he said Nigeria was more prepared for the second wave than the first as the government had developed mechanisms that could ensure businesses could continue operations without shutting down.
Three Areas Islamic Finance Institutions In Nigeria Should Look Into In 2021
On the top three areas Islamic Finance Institutions in Nigeria should focus on in 2021, he identified the Micro Small and Medium Enterprises, MSMEs that are shariah compliant as one key area for ethical investors to give top consideration.
He was of the view that MSMEs were adversely affected by the COVID 19 experience and based on this the Islamic Finance Institutions needs to explore the equity mode more than Debt Financing.
Supporting Households And Businesses
According to him, the Islamic finance institutions in Nigeria need to institutionalize the Zakat as a tool for supporting the households and businesses to stabilize.
Paying Attention to Security
The ongoing security issues in the nation due to lack of jobs and opportunities remains a major concern and menace in Nigeria. Muhammad called on Islamic finance institutions to collaborate with the government and reach out to more people on job opportunities. He concluded that without security no business could operate efficiently.
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