(Continued from last week)
Let me pause here and issue a disclaimer: This is not a call for Shenanigans (financial) experts to showcase ingenuity for selfish and greedy purposes as observed on Wall Street. It is only a suggestion to the Islamic finance universe to broaden its offerings in order to adequately cater for diverse groups of customers, Muslims and non-Muslims, who are expected to continue to search for an alternative (banking system).

A particularly vital area where Islamic banking promises to create immense value is in microfinance.  Microfinance, when practised properly, tends to adequately cater for the financing needs of relatively less affluent masses. To cap it, this exactly fits well with the ethical bias of Islamic finance since micro finance meets two of the core requirements: it is asset based and is morally/socially responsible.

So, what’s next?
Historically, only two core markets have extensively dominated the Islamic finance space - the Middle East (most importantly the oil-exploring Gulf countries) and Southeast Asia (Malaysia being the unchallenged leader in this industry). In recent years, there has been an increased expansion of Islamic banking and finance, with economically significant countries such as the United Kingdom, France, Japan and even China considering some form of Islamic-compliant finance for their domestic market, thereby adding more stakes and credibility to the industry.

Interestingly, Africa is not lagging behind. There was a recent publication on how Central Bank of Nigeria’s (CBN) new phase of reforms may aid Islamic Banking.

And let us not dismiss the Nigerian ‘situation’. I do not envisage the idea of Islamic Banking to be quickly entrenched in the mind of the average Nigerian customer. It is an open secret that Nigerians do not perceive events and/or actions as strictly pure black or white - well, there has to be a shade of gray in it. The citizenry find it difficult to trust one another and those who are optimistic and brave enough to do so are often severely penalised by the crooked counterpart.

To embrace and practise Islamic banking (which places a lot of emphasis on mutual trust, justice, fairness and equity) might prove to be a challenge where the majority of a nation complains about corporate and large- scale organisational irresponsibility, bribery and corruption, unemployment, poor infrastructural development, poor work ethics, continued manufacture of poor quality, fake and substandard goods and services, homelessness, poverty and hunger, poor maintenance culture, poor planning, lack of security and disregard for human life and property, armed and pen robbery amongst others. However, this should not be viewed as deterrent.

Instead, it presents the industry with an opportunity to consider and incorporate those fundamental factors around formation, structure and risk framework of its operations within the Nigerian context.

With the growing maturity and universal acceptance of Islamic finance, I would also suggest that there needs to be a shift in concentration from the purely theoretical discussions to addressing the practical challenges by engaging in structured, but open and honest deliberations among scholars, active professionals and key staff members of financial institutions.

(Concluded)

Mrs Bello is of the ING Investment Management, Atlanta Georgia, United States of America.