Islamic microfinance prospect and challenges in west africa

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Islamic Micro-finance System Prospects and Challenges in West Africa,

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  • 1. Islamic Microfinance Prospectand Challenges in West AfricaSalaudeen Jubril Abdullah PhD4th Global Islamic Microfinance ForumNovember 1-2, 2014Dusit Thani Hotel Dubai U.A.E

2. The Objectives The aims of this presentation are to explore the possibilities ofintroduction of Islamic Microfinance banks in West Africancountries, present the need for Islamic Micro-finance banks,as well as to look at the prospects and challenges that comewith the introduction of the system. Already some few Islamicfinancial institutions have begun operations in Nigeria, Guineaand Senegal, but, they are to some extent at experimentallevel. The fact that West Africa has the second largest numberof Muslims in Africa after North Africa should have attractedthe attention of global communities concerned with thedevelopment of Islamic Micro finance world wide. But,despite the large population not much has been achieved inthe spread of the system in the region, even in Nigeria withmore than 60 million Muslims. 3. Outline West Africa Financial dualism Islamic Micro Finance in West Africa Prospect of IMFI in W/Africa Challenges of IMFI in W/Africa The Future of IMFI in W/Africa Summary End of presentation 4. West Africa in brief Located at the Western part of Africa Mostly Sub-Saharan Africa Made up of 16 nations Colonized by Britain and French Significant cultural and Religion Diversity Primitive farming methods The region fall under equatorial region Mineral resources that include crude oil, gold,diamond and bauxite. 5. Financial Dualism Formal Financial Sector ( CB, FI, Stock exchange etc) The Informal Financial Sector ( Esusu, daily contribution,and cooperatives) Large informal business sectors ( population in rural areas, un-banked,low literacy, but with skills, ideas and willing to work) Absence of other financial institutions in therural areas A major consequence of a large informalsector is difficulty in economic management. 6. Islamic Micro Finance in W/Africa The west African region and Islamic Microfinanceneed each other for mutual benefits; Islamic Micro finance system will help acceleratethe region economic growth and development,and help reduce inequality and poverty. While the region will provide the Islamic MicroFinance system with new growth area with itspopulation of over 300 million people. 7. Efforts of past Government Some of the programmes tailored to address theproblems of financial dualism, poverty andunemployment by successive Nigerian governmentsare; Rural banking scheme, Peoples Bank, operation feed the nation (OFN), green revolution, Nigerian Bank of Commerce and Industry (NBCI), Nigerian Agricultural and Cooperative Bank, Nigerian Economic Reconstruction Fund (NERFUND), 8. cont Nigerian Directorate of Employment (NDE), Family Economic Advancement Programme(FEAP), Poverty Alleviation Programme (PAP), Nigerian Industrial Development Bank (NIDB), Bank of Industry (BOI), Nigerian Agricultural Cooperative and RuralDevelopment Bank (NACRDB), communitybanking and recently microfinance banking. 9. And the Result? Big Failure!!! Programs to aimed at inclusion High interest element ( 4% monthly) No trained manpower Unstable government ( coup and counter coup) lack of banking culture in the rural areas andamong the urban poor Religion and Culture of the people are notconsidered Lack of basic infrastructure 10. The Future 70% of the region population is engaged in theinformal sector or agricultural production. Conventional microfinance banks in Nigeria serveless than one million people against the over 40million that require their services. Enormous market for Islamic microfinance banks. 65% of the entire population of w/Africa has noaccess to banking services There is an enabling law for Islamic Microfinancein Nigeria, so it is with other countries in theregion and at worst discussion has commenced. 11. Challenges The region is face with,-regular changes in government policies,- lack of requisite human capital,- infrastructural inadequacies and socio-culturalmisconceptions.- banks are further inhibited by corruption -frauds and forgeries and poor corporategovernance. 12. Conclusion The capacity building for the practitioners improving social infrastructure in the country.power supply constitutes huge cost tomicrofinance banks. Training of clients in financial literacy beforedisbursing loans. 13. End of PresentationThank You

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