BY VICTORIA ONU, ABUJA
WITHIN the next few days, the Islamic Development Bank said it would release the sum of $150m for the development of Special Agro-Processing Zones in Nigeria.
The Vice President, Country Operations, ISD, Mansur Muhtar, confirmed this on Tuesday during a panel session at the 5th African International Conference on Islamic Finance held in Abuja.
In recent years, Islamic finance has experienced exponential growth throughout the world, including in Muslim minority countries such as United Kingdom, Luxembourg and South Africa among others.
Total Islamic asset across all sectors of banking, sukuk funds and takaful has been estimated at $2.44trn.
Muhtar who spoke on the theme, “Infrastructure Financing, Sustainability and the Future of African Markets”, said that Islamic Finance offered several features and practices that support infrastructural growth.
He said, “Islamic banking is asset backed and based on participation and risk sharing, we also have to look at other elements which are the social and environmental sustainability that are consistent with Islamic principles of supporting infrastructure.
“At ISD we focus on projects in social and fiscal infrastructure, to implement these projects we place a lot of emphasis on regional connectivity.
“For example, in Nigeria in the next couple of days, the ISD will be making a contribution to a project that is aimed at supporting the development of special agricultural processing zones and we will be committing $150m.
“We have also been involved in several other projects in Nigeria.”
In September, the African Development Bank disclosed that it was collaborating with other multilateral organizations to finance, with the sum of $520m, the first phase of Special Agro-industrial Processing Zones in some selected states across Nigeria.
A former Governor of the Central Bank of Nigeria, Sanusi Lamido, who spoke at the event, noted that one of the most significant impact of Islamic finance was that it provided a potent alternative for resource mobilisation as well as fair and equitable allocation of resources.
He, however, noted that for the benefits of the model to be achieved, an effective legal and regulatory framework that would enforce the legality of finance contracts and ensure Sharia compliance must be put in place.
“Regulators especially in the banking, capital markets and insurance have been quite responsive to this development, through creating the enabling environment, facilitating its integration into the mainstream financial sector and generating awareness to achieve higher level of its acceptance, and thus higher level of financial inclusion.
“Going forward, there is a need for more collaboration between regulatory authorities to grow the industry, as well as more awareness generation and more professional development for effective and efficient operation of the institutions in order to instill and maintain stakeholder confidence and achieve optimum performance,” he added.
Sanusi who is a former Emir of Kano, urged the apex bank to continue with its initiative of developing non-interest liquidity management instruments, especially short-term papers for non-interest banks.
Without these instruments in the market, he said, the possibility of creating a non-interest inter-bank market was very slim, noting that this would impact negatively on the profitability of the financial institutions involved.
He said, “Islamic finance provides a potent alternative for resource mobilization and fair and equitable allocation of resources that could help address the sustainable development goals.
“However, an essential condition for the development of Islamic finance markets is the presence of an effective legal and regulatory framework to provide an enabling environment that will create a level playing field, and enforce the legality of Islamic finance contracts and ensure Sharī’ah compliance.
“Regulators especially in the banking, capital markets and insurance have been quite responsive to this development, through creating the enabling environment, facilitating its integration into the mainstream financial sector and generating awareness to achieve higher level of its acceptance, and thus higher level of financial inclusion.
“Going forward, there is a need for more collaboration between regulatory authorities to grow the industry, as well as more awareness generation and more professional development for effective and efficient operation of the institutions in order to instill and maintain stakeholder confidence and achieve optimum performance. This forum is one such initiative for achieving the needed collaboration and awareness generation. We hope that the conveners will continue with this.”
Sanusi said the issuance of sovereign Sukuk in Nigeria, South Africa, the Gambia, Senegal, Togo and Cote d’Ivoire was a significant milestone for Islamic finance in Africa, adding that there was an over-arching need to make Sukuk issuance as constant as possible in order to have a yield curve for each jurisdiction.
This, he noted, would encourage sub-sovereign and corporate Sukuk issuances, and thus deepen the Sukuk market that is necessary for the growth of the trio sectors of Islamic banking, Takaful and Islamic Capital Market.
