Finance Specialists Review Opportunities and Challenges for Islamic Finance In Nigeria


Saturday, January 18, 2020 / 02:40 PM / Bukola Akinyele for WebTV / Header Image Credit: WebTV


At a recent discourse on the prospects for the development of Islamic Finance anchored by Mrs. Hajara Adeola, CEO of Lotus Capital, His Royal Highness Muhammadu Sanusi II, CON the Emir of Kano, gave his views on the  Opportunities and Challenges facing the growth of Islamic Finance in Nigeria.


He believed that with the number of institutions, like two Islamic banks, four takaful insurance companies, several microfinance banks, asset management funds and mutual investment funds, the Islamic Finance market is beginning to take shape in Africa's largest economy.


Sanusi was of the view that since the licensing of Islamic Banks, there must be efforts to re-orientate Nigerians on the fact that the market is an alternative source of finance and not a subtle agenda to Islamize Nigeria. 


According to him, the industry has to move to the point that there is acceptance of Islamic Finance products by the populace. He said in 2014, the Alternative Finance Committee submitted its report to the Federal Government, on the roadmap to developing the non-interest finance market.


Because the previous government was sensitive to the concerns and controversies surrounding Islamic Finance at the time, HRH Muhammadu Sanusi II said it took 5 years before the first Sukuk took off in Nigeria.


The Emir of Kano stressed that Islamic finance is not just non-interest finance, but a market that has broad ethical implications capable of addressing the socio-economic issues in developing countries in a fundamental way.


Giving an overview of the last two Sukuk issued, HRH Sanusi II said Nigerians can now see where the money is going as it is project-tied and has cash- backing provisions for all the projects executed.


Compared to other project finance instruments, the Sukuk, according to the Emir of Kano, provides the framework for ensuring that the issues around the viability, relevance and transparency of the project are addressed.


"All the concerns we have about the capital project, conception, implementation, financing and the ethical norms are addressed by Islamic finance. The more we emphasize the ethical and responsible nature of Islamic finance beyond interest, the more we get an acceptance which we have not done enough in Nigeria," Sanusi said.   


On the opportunity that Islamic Finance brings to the area of financial inclusion, Sanusi highlighted the issues of delivery of financial services, products and enlightenment as critical points.


According to him, Nigeria and mostly Africa have a very high level of mobile phone penetration and using mobile financial services is a major area of growth. He believed there was a need to design Islamic finance products in a way that encourages savings and the provision of loans or equity finance through the use of mobile phones.


He tasked Nigeria to adopt the terms of conventional financial products as is applicable in countries like Kenya, Tanzania, and Rwanda.

The Former Central Bank of Nigeria Governor called for a review of the models to accommodate the inputs of telcos that can help upscale financial services like in Kenya and Ghana.


"We need to standardize the Islamic finance products, commodify them and create awareness on them across the country," He added.

Speaking further, he charged the CBN to review the model, recently Ghana moved from bank-level to telco level and there is rapid growth in financial services in Ghana.


He emphasized the need for improved technical skills and capacity building to broaden the scope of risk sharing and ethical finance, which are part of the components of Islamic Finance.


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