Central Bank of Nigeria governor Sanusi Lamido Sanusi recently expressed the need for Nigeria and other African countries to tap into opportunities provided by Islamic financing to fund infrastructure development on the continent. Sanusi, who spoke at a conference on Islamic banking, pointed out that Islamic bonds called Sukuk, if well developed, could serve as a financing option and complement government’s efforts in infrastructure development. Authorities in this aspect of financing say it is a depository institution of financial intermediary that specialises in providing finance on sale, lease or sharing bases; Shari’ah is a criterion for financial transaction, with its tenet of non-profit modality.
It is widely accepted that conventional banks in Nigeria have failed to finance development because of their overdependence on profit. This is not bad in itself because it is the whole essence of business. But banks are expected to be the engine of national development activity particularly in the strategic sectors of the economy. They should also drive growth through the creation of opportunities capable of generating resources that can have a multiplier effect on the economy generally.They have not done this satisfactorily. It is a known fact that banks in Nigeria go into areas of little or no risks -- buying and selling --ignoring such areas as infrastructure development, real sector, agriculture and housing.
In spite of incentives by government to drag them into some of these core areas of economic activity, the response has been, at best, lukewarm. They claim that cost and tenor of funds make it difficult to invest in areas with long gestation. They also blame these for the high interest rate regime that is capable of discouraging the most optimistic fund user from sourcing money from the system. Yet, as revealed not too long ago, the level of mismanagement and bare-faced stealing by highly-placed insiders proves that the conventional banks, at least in Nigeria, were not set up to push economic growth.
It is on the basis of this realisation that we are persuaded to argue in favour of any other system, Islamic finance included, that can help speed up things in the nation’s quest for growth and development. Experts in Islamic finance like Sanusi have assured that a borrower who meets other criteria required in the transaction processes accesses funds interest-free. And this is regardless of the borrower’s religious persuasion.
Such source of easy finance is what this country needs at this time, if only the debilitating stereotypes like religious and cultural affiliations were done away with. We, therefore, support any effort to expand this financial system. It has the potential to succeed where the conventional banks have failed.
(Leadership / 03 July 2013)
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com