Friday, January 01, 2021/ 1:00 PM / Bukola Akinyele-Yisau for
WebTV / Header Image Credit: WebTVNG
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
- Respond: In this area he highlighted the fact
that it delivered
immediate action through the South-South and North-South axis with reverse
linkage operations focused on a) strengthening health systems to provide care
to the infected; b) building capacity in production of testing kits and
vaccines; and c) building Pandemic Preparedness capacity, in cooperation with
G20 Global Initiative.
- Restore: On the concept of ‘Restore’ he noted
that it was meant for a
medium-term action through financing for trade and SMEs to sustain activity in
core strategic value chains, and to ensure continuity of the necessary supplies
mainly to the health and food sectors, and for other essential commodities.
- Restart: This according to Muhammad delivered long-term action to build resilient economies on solid
foundations and catalyze private investments by supporting economic recovery
and countercyclical spending.
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
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
and awareness to improve upon the 2020 performance
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
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
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