via Vanguard : ISLAMIC Banking has the capacity to discourage financial speculation, enhance job creation and boost economic development. Managing Director/Chief Executive, Islamic Banking and Finance Institute of Nigeria (IBFIN), Sani Aminu, stated this in Lagos at a sensitisation workshop for journalists on Fundamentals of Islamic Economics, Banking and Finance.
He said: “It is time Nigerian policy makers recognise Islamic finance can significantly contribute to economic development, given its direct link to physical assets and real economy. The use of profit-and-loss sharing arrangements encourages the provision of financial support and generates jobs. The emphasis on tangible assets ensures that the industry supports only transactions that serve a real purpose, thus discouraging financial speculation.”
He explained that Islamic finance is equity-based, asset-backed, ethical, sustainable, environmentally-and-socially-responsible finance. It promotes risk-sharing, connects the financial sector with the real economy and emphasizes financial inclusion and social welfare.
He said: “Further Islamic finance helps promote financial sector development and broadens financial inclusion. By expanding the range and reach of financial products, Islamic finance could help improve financial access and foster inclusion of those deprived of financial services. Islamic finance emphasizes partnership-style financing, which could be useful in improving access to finance for the poor and small businesses. It could also help improve agricultural finance, contributing to improved food security.
“It is to the advantage of Nigeria to note that Islamic banking and finance has the potential to check greed, highhandedness, selfishness and corruption not only in the banking and finance industry but also in the public sector. Islamic banking and finance, being asset-based, should in principles be less prone to financial crime. In the international transactions, if equity-based tools of Islamic finance are used to bring foreign capital into Nigeria, technically the new injection of foreign capital into the country will not lead to an increase in national debt.
“Even in the case of government using Sukuk for raising debt-based Shariah-compliant capital, the financing will be tightly linked to an already existing asset or will be used for creating new assets. This close proximity with the assets being financed makes Islamic banking and finance less prone to corruption.”