Policy and Regulation

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

“…The implementation of non-interest microfinance banking services will lead to citizens, societies, and businesses in the formal field refusing to patronise conventional MFBs based on religious, ethical , and cultural convictions. This will also help those economically active poor people who patronise those institutions in sustainable ways, alleviating poverty, addressing long-term inequalities, increasing income potential, and enhancing their overall welfare (CBN, 2016). The size of the Muslim community is one aspect that may affect the need for Islamic microfinance in Nigeria.…”

“…Against this background, there have been calls for sharia-compliant microfinance institutions in Nigeria. As a result, the Central Bank of Nigeria revised its guidelines to contain the NIFIs which are sharia-compliant (CBN, 2016;UBN, 2019). Such reluctance to engage with conventional microfinance has also impacted the development of Muslim microenterprises.…”

“…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.…”

“…The implementation of non-interest microfinance programmes is projected to bring into the official sector those individuals and microenterprises who are not prepared to patronise conventional microfinance institutions based on religious and cultural principles. This also helps the socially productive poor who patronise these institutions, alleviating poverty and improving their standard of living (CBN, 2016;Khalfa, 2015;Obaidullah, 2008;Abdul Rahman, 2010). Hence, microenterprises' access to financing enables their growth and sustainability.…”