Framework for an Effective Islamic Microfinance in Northern Nigeria

Exploring the Advancement and Roles of Islamic Microfinance Institutions in Microenterprise Development in Nigeria

“…Therefore, this bold initiative is still valid. The CBN reviewed the policy in 2011, five years following the formulation of the microfinance policy to address the experiences gained global changes, and the future prospects for small -scale enterprises in Nigeria (Abiola, 2011;Dogarawa, 2009;Hussaini, 2017;Kanayo & Nancy, 2013;Onakoya & Onakoya, 2013).…”

“…Thus, even though IMFIs have the same aims and challenges as conventional MFIsas they strive for financially sustainable development and the empowerment of the poor - Dogarawa (2009) suggested that Islamic microfinance, arguably, could help to correct the shortcomings of conventional microfinance as it focuses on achieving social justice and addressing the issues of poverty and entrepreneurial development of the poor while disallowing exploitation through the charging of high-interest rates. This is further strengthened by the fact that 'adl' (social justice) and 'ihsan' (benevolence) are the theological foundations of the Islamic financial system.…”

“…The Islamic solution to poverty alleviation with microfinance underlines the need for a dual solution: a zakat and awqaf-based welfare initiative for the destitute, elderly and 'unbankable', and a microfinance wealth generation programme. Many of the values implicit in the Islamic solution include exposure to the system for the poorest of the poor, diligent evaluation of the financial wellbeing of the poor, empathic research, emphasis on investment and beneficiary participation, and turning the beneficiary's unproductive assets into income-generating assets by valuation (based on market discovery via auctioning) (Dogarawa, 2009;Abdul Rahman, 2010).…”

“…However, many potential microfinance customers in Nigeria particularly Muslims, have rejected traditional microfinance products due to their failure to adhere to Islamic values, as a result of high fixed-rate charges and unethical credit facilities which are against their faith (Central Bank of Nigeria [CBN], 2016;Dogarawa, 2009;Hussaini, 2017). In 2011, the framework policy and guidelines for microfinance were revised to accommodate non-interest (Islamic) microfinance institutions.…”

Challenges Hindering Islamic Microfinance Banks’ Sustainable Financial Inclusion: A Case of Al-Hayat Microfinance Bank in Ogun State, Nigeria

“…As a result, financial exclusion, lack of awareness, distrust, the high cost of running a unit microfinance bank (due to CBN capital requirements), liquidity pressure, insufficient human resources, and a lack of Islamic banking-based financial technology, among other factors, are likely to be the root causes of this low development. (Dogarawa, 2012;Gumel, Saad, & Kassim, 2014;Onakoya & Onakoya, 2014). In addition, some people still do not trust microfinance banks industries as a whole due to several financial burdens and hiccups caused by existing conventional microfinance banks.…”