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Finance | Islamic Finance

Proper Regulations, Key to the growth of Islamic Social Finance in Nigeria

Jun 24, 2022   •   by Bukola Akinyele-Yisau   •   Source: WebTV   •   eye-icon 1275 views

The growth of Islamic Social Finance in Nigeria hinges on a proper and robust regulatory framework. Souliyat Damilola Sodjete, Head, Financial and Shariah Advisory, Marble Capital Limited, made this point while speaking on “Islamic Social Finance and Economic Stability in Nigeria.”

 

She believed Islamic social finance could thrive with the right regulatory approach and a good model.  Speaking on the specific challenges faced in applying the mechanisms of Islamic social financing in Nigeria, she highlighted the regulation issue and the lack of capacity. 

 

She called on industry stakeholders to develop solutions to address the transparency issues, adopt appropriate technology, and establish a check and balance system for the business. The financial practitioner explained that the Islamic financial institutions are proliferating in the country, with more activities in the capital market through Sukuk issuance, while the microfinance segment is also gaining traction.

 

According to her, Islamic microfinance helps the market women meet their working capital needs by assisting them in purchasing the inventory needed and empowering them financially. “Also, Islamic microfinance gives Qard-al- Hassan, small interest-free loans, Murabaha and Ijarah. Islamic finance promotes shared prosperity.” 

 

Speaking further, she noted that Islamic Social Finance had been inadequately used to unlock economic activities in Nigeria. She pointed out that Zakat, the most crucial instrument in Islamic social finance, has not been deployed effectively. 

 

“Zakat payment needs to be structured, regulated, and a body should be created to oversee the social aspect of Islamic finance, to reduce poverty and provide products like waqf in the market.”

 

She added that there could be a Waqf market for micro Takaful corporations to secure their businesses and distribute resources to those in need.  Waqf and blockchain can be used to improve collection due to its transparency. 

 

On ways the instruments can be used to fund the healthcare industry, as well as other social initiatives, including feeding the hungry, improving clean water access, and funding primary education, she explained that Ijarah had been deployed to purchase medical equipment needed in the healthcare sector with the expected returns. 

 

Stakeholders in the industry can also partner with the United Nations (UN) agencies to lift poverty alleviation. She noted that the UN used the Zakat blockchain to eradicate hunger and tasked Nigerians to emulate such an initiative to address socio-economic issues.

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