Friday, July 24, 2020 / 1:00 PM / Bukola Akinyele for WebTV / Header Image Credit: WebTVNG
Investments in Financial Technology, Infrastructure and Micro, Small and Medium Enterprises are ways Islamic Trade Finance, can support Nigeria's economy and lift millions from poverty.
Mr. Abdulkader Thomas President & CEO of Shape Knowledge Financial Services (SKFS), Kuwait disclosed this in an interview on WebTV's programme "Islamic Finance Weekly" that discussed "Islamic Trade Finance, Challenges and Opportunities in Nigeria and Africa".
According to Thomas, a lot can be done through fintech, to provide funding to MSMEs in the country, which can translate to economic activities that lead to gainful employment of youths in the country.
Giving insight into Islamic Trade Finance, Thomas noted that it was a different form of intermediation of non-interest banks, and represented trade finance that was Shariah-compliant and Ethical.
Speaking on the role of the International Islamic Trade and Finance Corporation (ITFC) in deepening the non-interest finance market in Nigeria and Africa, Thomas said ITFC provides credit to businesses in the Organization of Islamic Countries (OIC) supporting their growth and global competitiveness.
Secondly, the ITFC from his perspective creates credit lines for banks and organizations within the OIC member countries zone to access and benefit from.
On the impact of the COVID-19 pandemic, he said the ITFC has been supporting OIC members especially those in the energy zone, that are grappling with the additional effect of crude oil price shocks including Nigeria.
Responding to how the Islamic Trade Finance Framework can helping to grow Intra-African trade, the Kuwaiti-based finance analyst said there is no doubt, that the United State and China are now in a cold war which has risk implications for the globe.
He said the global supply chain is already witnessing disruptions and there is a need for structured trade financing vehicles like the Islamic trade finance, to address the challenges of the ecosystem and supply chains.
In respect of challenges and opportunities for integrating Islamic trade finance to support African businesses and SMEs, the CEO of SKFS said, the first and most important problem is the market perception. He observed that it was important to understand the transactions in Islamic finance which was documented and entailed risk-sharing.
He said the priorities of Islamic Trade Finance are often to provide credit risks for off-takers in sectors like Agribusiness.
The Islamic Finance expert cited the "Musharaka" which is also a profit and loss sharing partnership, but one where investment comes from all the partners who are given the option of participating in the management of the business, and all partners share in losses according to the ratio of their contributions.
Musharaka is one of the instruments deployed in Islamic trade finance across the globe.
In terms of leveraging digital Platforms to promote trade and investments amongst OIC member countries, he said, Intra-OIC trade continues to benefit from Islamic trade finance with added opportunities and prospects by deepening the shariah-compliant trade through financial technology.