How the Islamic Financial System Could Navigate Global Economic Uncertainties

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Friday, September 10, 2021 / 12:41 PM / Bukola Akinyele-Yisau for WebTV / Header Image Credit: WebTV

 

The  Islamic Financial System has the resilience and the capacity to whether global economic uncertainties and challenges, like the 2009 global financial crisis, because of the model of no interest, no uncertainty, and zero tolerance for gambling alongside other illicit activities. Mrs. Shaista Mukadam, Senior Lecturer, Birmingham City University, United Kingdom, said this while discussing "Simplifying Non-Interest Finance and the Benefits for Nigeria".

 

According to her, the Islamic financial system is asset-backed. The debt cannot be sold; thus, the lender must bear the risk associated with it.

 

Speaking further she said the asset which is being sold or leased must be real, and not imaginary or notional. The seller or lessor must own and possess the goods being sold or leased.

 

She added that compared to conventional finance, Islamic finance is still evolving but has the unique selling point of being transparent in its model and approach.

 

Assessing the value, Mukadam noted that Islamic finance was now valued at about US$3trn in 2020 and could reach US$4trn by 2025.

 

The scholar disclosed that "Ethical Finance", the other name for Islamic finance, is based on profit, loss and risk-sharing.

 

She called for a lot of awareness on the value, opportunities and potentials of non-interest finance. Islamic banking according to her,  has been given a bad name because of some of the unscrupulous activities of some of  the practitioners

 

"Islamic Finance hinges on social and economic justice, and is not designed to Islamize countries like Nigeria but developed to boost financial inclusion and economic empowerment".

 

She mentioned that innovative Islamic finance products leveraging tech can support the deepening of non-interest finance in the country. 70 % of Nigeria's population is under 30 years, with an informal economy size more than 50% of its GDP.

 

Mukadam challenged Islamic Fintechs in Nigeria to explore partnerships with firms in Malaysia to develop relatable products that are Shariah-compliant and ethical, providing economic opportunities for millions of unemployed Nigerians.

 

She urged  Islamic finance ventures to reach out to other countries with successful working models and partner with those agencies.


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