Challenges Hindering Islamic Microfinance Banks’ Sustainable Financial Inclusion: A Case of Al-Hayat Microfinance Bank in Ogun State, Nigeria

Adnan Opeyemi Salaudeen(1*), Habeebullah Zakariyah(2)

(1) Institute of Islamic Banking and Finance (IiBF) Kuala Lumpur
(2) Institute of Islamic Banking and Finance (IiBF) Kuala Lumpur
(*) Corresponding Author

Abstract


Microfinance is regarded as an effective technique of poverty alleviation since it provides access to financial resources that can assist in poverty reduction by increasing financial involvement and empowerment. However, despite the fact that microfinance banks account for the vast bulk of the market in Nigeria, with over 800, their contribution to the country’s economy is less than 1%. Additionally, the primary objective of poverty eradication has not been accomplished. Thus, existing research has positioned Islamic microfinance institutions as a viable tool for poverty alleviation in Nigeria. However, Islamic microfinance banks in Nigeria continue to witness minimal development. This research investigates the challenges hindering the development of Islamic microfinance banks in Nigeria. Semi-structured interviews were used to collect data for this study. In addition, data reduction, coding, integration, and visualisation steps are implemented to analyse data effectively. The finding shows that several regulatory issues, such as licence procedures requiring paid-up capital, are some challenges. Likewise, awareness, misconceptions, and acceptance remain significant hindrances faced by IMFBs in Nigeria. Additionally, IMFBs face some in-house challenges, such as a lack of Islamic fintech, convenient access to the unbanked community, and human capital. Consequently, the study recommends that stakeholders in the Nigerian financial system launch public awareness campaigns about the significance of Islamic microfinance banks in promoting financial inclusion and reducing poverty.

Keywords


Islamic Microfinance; Poverty; Financial Inclusion; Al-Hayat Microfinance Bank; Nigeria

Full Text:

PDF

References


Abraham, H., & Balogun, I. . (2012). Contribution of Microfinance to GDP in Nigeria : Is There Any ? International Journal of Business and Social Science, 3(17), 167–176

Acha, I. A. (2012). Microfinance banking in Nigeria : Problems and prospects. International Journal of Finance and Accounting, 1(5), 106–111.

Adeleke, R., & Alabede, O. (2021). Understanding the patterns and correlates of financial inclusion in Nigeria. GeoJournal. https://doi.org/10.1007/s10708-021-10378-6

Adepoju, R. I., & Oyesanya, O. S. (2014). A Critical Analysis of Poverty Alleviation Strategies of Al-Hayat Relief Foundation in Nigeria. Journal of Islamic Finance, 3(2), 49–59. https://doi.org/10.12816/0025105

Al-Ameen, A. (2016). Implementing Islamic microfinance in Nigeria: a matter of equity and social justice. Journal of Sustainable Development Law and Policy (The), 7(2), 211. https://doi.org/10.4314/jsdlp.v7i2.10

Anand, S., & Sen, A. (1997). Concepts of Human Development and Poverty: A Multidimensional Perspective. Poverty and Human Development: Human Development Papers.

Bello, A., & Abubakar, M. (2014). Challenges and solutions to Islamic banking system in a pluralistic-secular country like Nigeria. Mediterranean Journal of Social Sciences, 5(6 SPEC. ISSUE), 25–34. https://doi.org/10.5901/mjss.2014.v5n6p25

Bilqis, A. (2012). Zakat and Poverty Alleviation : Al-Hayat Relief Foundation Contributions in Ogun State , Nigeria : an Overview, 274–282.

Carney, P. (1992). The Concept of Poverty. Public Health Nursing. https://doi.org/10.1111/j.1525-1446.1992.tb00079.x

Central Bank of Nigeria. (2005). MICROFINANCE POLICY, REGULATORY AND SUPERVISORY FRAMEWORK FOR NIGERIA CENTRAL BANK.

Central Bank of Nigeria. (2017). The Nigerian Financial System. CBN, Monetary Policy Department, 1–356. Retrieved from https://www.cbn.gov.ng/Out/2017/CCD/THE NIGERIAN FINANCIAL SYSTEM.pdf

Central Bank of Nigeria (CBN). (2017). Guidelines for Regulation and Supervision of Non-Interest (Islamic) Microfinance banks in Nigeria.

Dogarawa, A. B. (2012). Framework for an Effective Islamic Microfinance in Northern Nigeria. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1624748

Dogarawa, A. B. (2013). Critique of the Non-Interest Banking Framework In Nigeria. ISRA International Journal of Islamic Finance, 5(1), 115–134. https://doi.org/10.12816/0002760

Dogarawa, A. B., & Uthman, M. B. (2019). Regulatory and Operational Challenges of Islamic Microfinance in Nigeria. SSRN Electronic Journal, 1–15. https://doi.org/10.2139/ssrn.3492057

EFInA. (2021, February 15). Financial Inclusion - EFInA: Enhancing Financial Innovation and Access. Retrieved October 17, 2021, from https://efina.org.ng/

Egboro, E. (2015). Creation of Microfinance Banks in Nigeria: What is Their Main Object? British Journal of Economics, Management & Trade, 7(3), 158–174. https://doi.org/10.9734/bjemt/2015/15107

El Hadidi, H. H. (2018). Impact of Microfinance on Entrepreneurial Development: The Case of Egypt. In International Journal of Business and Social Science (Vol. 9, pp. 536–545). https://doi.org/10.30845/ijbss.v9n9p7

Enyia, J. O., & Inyang, P. E. (2018). The Regulatory and Operational Framework of Microfinance Banks on Consumers in Nigeria: An Appraisal. International Journal of Managerial Studies and Research, 6(7). https://doi.org/10.20431/2349-

Gumel, G. B., Saad, N. M. D., & Kassim, S. H. (2014). Assessing the impact of Islamic microfinance on poverty alleviation in Northern Nigeria. Journal of Islamic Economics, Banking and Finance, 10(4), 37–49.

Iganiga, B. O. (2008). Much Ado About Nothing: The Case of the Nigerian Microfinance Policy Measures, Institutions and Operations. Journal of Social Sciences, 17(2), 89–101. https://doi.org/10.1080/09718923.2008.11892638

Ishak, N. S. (2020). Demand for Takaful and Microtakaful in Malaysia. University of Sussex. Retrieved from http://sro.sussex.ac.uk/ This

Lok-Dessallien, R. (1999). Review of Poverty Concepts and Indicators. SEPED Series on Poverty Reduction. New York, Social Development and Poverty Elimination Division, UNDP.

Madise, S. (2019). The Concept of Financial Inclusion. https://doi.org/10.1007/978-3-030-13831-8_6

Mhammed, A. D., & Hasan, Z. (2012). Microfinance in Nigeria and the prospects of introducing its Islamic version there in the light of selected Muslim countries’ experience.

National Bureau of Statistics (NBS). (2019). Selected Banking Sector Data : Sectorial Breakdown of Credit , ePayment Channels , Deposits & Domestic Credit Breakdown and Staff Strength, (Q3).

National Bureau of Statistics (NBS). (2020). Annual Abstract of Statistics. Annual Abstract of Statistics, (March), 1–69. Retrieved from https://nigerianstat.gov.ng/

Nwanyanwu, O. (2011). Micro Finance in Nigeria: Problems and Prospects. African Research Review, 5(2). https://doi.org/10.4314/afrrev.v5i2.67307

Okpara, G. C. (2010). Microfinance banks and poverty alleviation in Nigeria. Journal of Sustainable Development in Africa, 12(6), 177–191.

Olayemi, A. A. M. (2012). The Legality of Islamic Banking in Nigeria: A Critical Approach. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1941010

Onakoya, A. B., & Onakoya, A. O. (2013). Islamic microfinance as a poverty alleviation tool: Expectations from Ogun State, Nigeria. Scholarly Journal of Business Administration, 3(2), 36–43.

Onakoya, A. B., & Onakoya, A. O. (2014). Alternative Financial Inclusion Strategy : Islamic Expectations from Ogun Sub - National Government , Nigeria. Singaporean Journal of Business Economics and Management Studies, 2(11), 169–180. https://doi.org/10.12816/0006791

Salako, T., & Azeez, A. (2018). Semi-Formal Islamic Microfinance Institutions in Nigeria: the Experience of Al-Hayat Relief Foundation. Journal of Contemporary Issues and Thought, 8, 41–54. https://doi.org/10.37134/jcit.vol8.5.2018

Seibel, H. D. (2003). History matters in microfinance. Small Enterprise Development.

Seibel, H. D. (2005). Microfinance in Nigeria: Origins, Options and Opportunities. University of Köln, 1–8.

Seibel, H. D. (2003). History matters in microfinance. Small Enterprise Development.

Seibel, H. D. (2005). Microfinance in Nigeria: Origins, Options and Opportunities. University of Köln, 1–8.

Sodiq, O. O. (2010). Islamic Microfinance and Poverty Alleviation at Grassroots in South-Western Nigeria: A Case of Al-Hayat Relief Foundation. Available at SSRN 1673162. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1673162

World Bank. (2018). GDP (current US$) - Nigeria | Data. Retrieved October 31, 2020, from https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=NG

World Bank. (2019). World Development Report 2020 — Global Value Chains: Trading for Development. World Bank Group.

World Population Review. (2019). Nigeria Population (2016) -.

Yakubu, S. M., Haruna, M. A., & Mohammed, A. I. (2018). Strategies for the Acceptability of Islamic Micro Finance Institutions in Nigeria. Journal of Economics and Finance, 9(6), 71–76.




DOI: https://doi.org/10.21154/elbarka.v5i1.3930

Refbacks

  • There are currently no refbacks.


Copyright (c) 2022 Adnan Opeyemi Salaudeen, Habeebullah Zakariyah

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

This Journal Indexed by:

Home

 

 

EL BARKA: Journal of Islamic Economics and Business
Faculty of Islamic Economics and Business
Institut Agama Islam Negeri (IAIN) Ponorogo
Kampus II Pintu, Jenangan, Ponorogo, Indonesia