Islamic Finance | |
Islamic Finance | |
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Friday, January 22, 2021 /
1:00PM / Bukola Akinyele-Yisau for WebTV / Header Image Credit: WebTV
Adoption of "Micro-Takaful" in Nigeria will help to support the current efforts of
the Federal Government in expanding the Social Intervention Programs (SIPs) for the
poor and indigent in the country said Mr.
Raheem Musa, MD/CEO of Al-Hayat Microfinance Bank, during a recent discussion
on Islamic microfinance.
According to Musa, "Micro-Takaful is a viable
business support arrangement that could assist MSMEs. It could also provide
solutions to helping the poor and salvaging the economy as it is based on
mutual benefits" he said.
He insisted that the introduction of Micro-Takaful
will address the high poverty rate in Nigeria and improve the social wellbeing
of the citizens which are the anchors of the SIPs that include initiatives like
the 'Conditional Cash Transfer', "Trader Moni" "N-Power" amongst others.
The MD/CEO of Al-Hayat Microfinance Bank said one of the sectors that are contributing to the
economy is microenterprises, and they need constant support.
Microenterprises according to him, contribute to 80%
of domestic employment, 50% of the local GDP, and 90% of the total number of
local enterprises.
He noted that the COVID-19 pandemic, #EndSARS
protests, oil price crash, and recession affected the microenterprise sector,
which prompted the government to stimulate the economy and introduce
interventions.
However, despite the efforts of the government, Musa
noted that Nigeria still faces many challenges as there are still unserved and
underserved markets in the micro-enterprise sector. He was optimistic that
Islamic finance could provide support to the underserved and the financially excluded.
Speaking further, the banker said that some of Islamic
finance's goals were to reduce poverty, improve economic wellbeing, support the
redistribution of wealth, and empower a larger number of citizens.
He advocated for Islamic finance products that target
the poor in the area of empowerment and the stimulation of rural economies.
Speaking on entrepreneurship for women, he acknowledged the fact that women constitute
50% of Nigeria's population and almost 41% of women participate actively in the
micro-enterprise sector.
According to him the Central Bank of
Nigeria has done a lot of things to increase the participation of women, by
providing funding support to them with guidelines in microfinance.
He added that Islam is a religion that is
gender-sensitive and gives women the right to earn income and run a business
within acceptable Islamic principles. Citing an instance, he said women
patronize his bank, Al-Hayat microfinance bank, more than men. Musa observed
that women play a critical role in the micro-finance sector.
Speaking on leasing as a form of finance under Shariah
guidelines, he said Ijarah was an Islamic finance instrument for
leasing, which had provisions that were acceptable to Shariah laws.
On the role of microfinance banks in
improving financial inclusion in Nigeria, he called for greater awareness
of products and services that microfinance banks could provide to underserved
communities and markets in the country.
"Islamic finance has a lot to offer such as
transparency, liquidity, and fairness and also funding
and collaboration which is critical for micro-enterprises and economies to
thrive," Musa said.
Making further comments on investment opportunities in
non-interest microinsurance firms like Al-Hayat, he explained that the
organization has an investment account for deposit and it follows the principle
of Mudarabah or Wakalah. Investors bring in money and the bank
serves as an agent through Wakalah to help them invest with little commission
of their returns. According to him, the Mudarabah transaction is
discretionary, no investor dictates where the money invested is placed as long
as such placed funds are safe, and would be invested in good projects.
He also pointed out that a lot of people invest in
these projects and share profit. Return, in this case, is arranged on a 60:40
sharing formula with the investor or depositor taking 60% while the bank as an
agent takes 40%.
Discussing how Al-Hayat has convinced Muslims and non-Muslims
that Islamic microfinance banks are a good alternative funding option in
Nigeria, particularly in Ogun state, he said, non-Muslims form a major
part of their customers as they constitute 45% of their customer base and they
trust the services of the bank, indeed a good number of the bank's staff are
Christians who have been well-trained in Islamic finance principles.
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