SPECIAL COMMENT: ‘Re-setting’ Islamic Finance in Nigeria

By Rushdi Siddiqui, head of Islamic Finance, Thomson Reuters

Nigeria has become a ‘battleground’ for Islamic finance, unfortunately further dividing Africa’s most populated country.

Some recent newspaper headlines include:

Islamic Banking: Muslims Ready to go to War

Islamic Banking: Insult to Nigeria - Cleric

Stop Islamic Banking in Nigeria

Islamic or Shariah banking: Any Benenfit for a Pluralistic & Secular nation

Islamic Banking only for North- Mutallab

Christian groups oppose establishment of Islamic Banking

Islamic Banking: Christian groups may apply for own license

Behind the headlines are the usual myths about Islamic finance: Its only for Muslims; it is a backdoor conversion of secular Nigeria into an Islamic state; and it is used to finance terrorism, among other misconceptions.

In Nigeria, Islamic finance cannot be positioned as a ‘choose or lose’ proposition. Nigeria, at one level, is an acid test in the cross-selling of Islamic finance to places like US, S. Korea, and other places where there is an anti-Shariah movement.

In Nigeria there were two early warning signs of the inevitable resistance to Islamic finance: many non-Muslim Nigerians did not want to be part of Organisation of Islamic Conference (OIC) and the opposition to Boko Haram, an off-shoot of Al Qeda.

Going by the sample of newspaper headlines, many non-Muslim Nigerians are not convinced Islamic finance is about business, but rather about religion. Even if slick presentations with eloquent oratory were made about its ‘peaceful’ presence in UK or Hong Kong, Singapore, Luxembourg, Paris, and other non-Muslim countries, those opposed were not going to be convinced because of religion, history and landscape of Nigeria.

The same anti-Islamic finance people are not interested in tapping Gulf Cooperation Council money, because they believe it will not reach them as Islamic finance is only for Muslims. They believe this money will give the Muslims more power and influence, resulting in the mass conversion of Christians and a caliphate established in Nigeria.

Furthermore, these people would not give much credence to examples of the success of Islamic finance in sub-Saharan African countries like Kenya, Uganda, South Africa and Ghana, among others. The political dynamics are different in a country as large and as diverse as Nigeria.

Notwithstanding the existing charged situation in Nigeria, is there a way to ‘reset’ the Islamic financing offering in the country?

Financial inclusion is the essence of Islamic finance, hence, all the important stakeholders need to be involved in not only educating people and eradicating fears, but more importantly, to solicit their opinion.

The Nigerian media carries the message to the masses and they need to be briefed on: ‘what Islamic finance is and, more importantly, what it is not.’ This would entail presentations and question and answer sessions by the Governor of the Nigerian reserve bank, Mallam Sanusi Lamido Sanusi, and his supporters, who are in favour of the introduction of Islamic Finance to Nigeria.

These briefings should be part of an on-going dialogue.

The same approach must be utilized to brief members of Parliament, with the emphasis on interactive question and answers.

Perceptions can also be corrected by explaining the selection process of Shariah compliant stocks. If we apply the present Islamic stock screening, similar to negative screening of social-ethical investing, to the Nigerian stock exchange, it will show local compliant companies.

Typically one third of companies listed on an exchange are shariah compliant, hence, some of these companies may already be in investors portfolios. This will make it clear that Islamic equity investing is not about investing in ‘shady’ companies that have hidden Islamic agendas.

As part of inter-faith dialogue, finance should also be discussed among religious people, Imams and priests/bishops. Financial education is needed for the Imams on Fiqh-ul-Maumalat, but it’s better to do it right rather than fast.

One of the most often raised allegations about Islamic finance is that it is used to finance terrorism, be it via Zakat or the donation of
impermissible income. Obviously, perceptions are stronger than reality, and needs to be addressed by Imams and scholars as first line of
education outreach.

Non-Muslim chief executives and other senior executives from Islamic banks must be brought to Nigeria to explain the proposition as they have more credibility when speaking to local non-Muslims and clergy. It will also show that Islamic finance is not only for non-Muslims as customers, but also as employees.

Nigeria should look at the track record of a strong Muslim secular state like Turkey, which has Islamic banking. Turkey calls it Participation Banking, the essence of Islamic finance, and such branding will resonate in Nigeria.

Finally, it might have been easier if Governor Sanusi included the Halal food industry with Islamic finance. Everyone loves food and its foundation of meaningful dialogue.

It is not too late to reset the discussion about Islamic finance in Nigeria.