Religiosity and threshold effect in social and financial performance of microfinance institutions

 Mohammad Ashraful Mobin

Islamic Micro-finance in NigeriaIssues and Prospect

Salaudeen Jubril Abdullahi

Outline

• Nigeria in brief• Microfinance in Nigeria• Efforts at Micro-Financing• Islamic Microfinance• Issues with Islamic microfinancing• Opportunities in Islamic Microfinancing

Nigeria

• Population: 173.6 million (2013)• Area: total: 923,768 sq km land: 910,768 sq km water: 13,000 sq km• Currency: Naira• GDP: $492.986 billion (nominal; 2015)

$1,105.343 Billion (PPP; 2015)Official Language: English and French

Micro-Financing in Nigeria

• Perceived deficiencies in the existing financing schemes for the poor and small businesses.

• Existing community banks and NGO microfinance licenced by CBN for operations in 2007

• Over 40% of the licenced MFB have failed• Frowning at interest on loans due to religious• Withdrawal of 224 microfinance banks license in

2010

Efforts of the past• Financial dualism: Poverty and Unemployment • Rural banking scheme, • Peoples Bank,• Operation feed the nation (OFN),• Green revolution, • Nigerian Bank of Commerce and Industry (NBCI), • Nigerian Agricultural and Cooperative Bank, • Nigerian Economic Reconstruction Fund (NERFUND), • Nigerian Directorate of Employment (NDE),• Family Economic Advancement Programme (FEAP),• Poverty Alleviation Programme (PAP), • Nigerian Industrial Development Bank (NIDB)• Bank of Industry (BOI), • Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB),• Community banking and • Microfinance banking

Islamic micro-finance in Nigeria

• The CBN sent out an Exposure Guidelines on the Regulation and Supervision of Non Interest (Islamic) Microfinance Banks in Nigeria May, 2016

• We have a few groups who have piloted and they are quite encouraging

• Muslims are focused in Food production and there are small farm holders which is a ready market

Issues with Islamic Micro Finance

• Lack of basic infrastructure compounds the operational difficulties of these banks

• Lack of Skilled labour to operate and manage Islamic microfinance bank

• Poor banking culture in the rural areas and among the urban poor

• Lack of awareness and promotion for Islamic Finance by regulators and practitioners

Islamic Microfinance Prospects

• About 70% of the population engaged in the informal sector or agricultural production

• Government’s renewed interest and improved regulatory environment in the microfinance sub-sector

• Nigerian Muslims are looking forward to have Islamic Microfinance Institutions

Opportunities

• The new phase of licensing by the CBN• Training and Development opportunities• Opportunities for Takaful and Micro-Takaful• Opportunities for Islamic Venture Capitals• Opportunities for Investors who are looking at

green fields• Consulting opportunities• Infrastructure Development opportunities

Summary

• Islamic Micro-Financing has strong potentials in Nigeria

• There is a need for capacity development for Islamic Microfinance in Nigeria

• Education of the Mases is required• Regulation are being put in-place for ease of

operations• The timing for new entrance is now

THANK YOUSALAUDEEN JUBRIL

End of Presentation

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