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Sukuk: a Viable Resort For Capital Projects in Africa – Bank Chief

(AFRICAN EXAMINER) – Following its viability and suitability, many West African countries and companies may in the nearest future, fall back to Sukuk bonds to raise non-interest funds to finance their capital projects as well as corporate growth plans.

The Managing Director, Jaiz Bank Plc, Mr. Hassan Usman, who made this submission, last Sunday at the end of two-day National Convention of the Moshood Abiola Polytechnic Abeokuta Muslim Alumni (MAPAMA) affirmed that due to the latest development, there would be a ”frenzy of Sukuk issuance” as more countries discover its potential as a major leverage for their national development.

It would be recalled that Nigeria recently issued its maiden sovereign N100 billion Sukuk and it was successful as it was oversubscribed to the tune of N105 billion, raising optimism on the depth of the market.

Usman, predicted that scramble for Sukuk issuance in the nearest future could make the non-interest capital market grow bigger and faster than the conventional banking system.

“This is due to the inherent linkage of Sukuk to an underlying asset. The IMF asserts that with Sukuk, African nations could tap into growing Islamic financial markets to meet infrastructure financing needs instead of using conventional financing from international finance institutions such as the World Bank or the African Development Bank or relying on borrowed Chinese funds,” Usman said.

According to him, non-interest banking (NIB) in West Africa has a lot of potentials due to a number of positive indicators including the economic growth in many West African nations supported by improving fundamentals, growing domestic demand and stronger regional integration.

He added that with a population of about 329 million people, the emerging middle-class segment of the region is expected to boost demand for NIB retail banking, Takaful and Islamic funds.

Mr. Usman noted that with financial literacy improving across the region, greater understanding of the benefits and dynamics of NIB products shall usher in greater up-take of the products and help to deepen financial inclusion.

“Most importantly, NIB’s growth in the region is heavily going to be influenced by its infrastructure deficit-mainly new airports, power plants, roads and railways and the urgent demand for creative and alternative approaches to funding the gap, which is common to all the countries without exception,” the Jaiz Bank declared.

He pointed out that Islamic finance has a lot of opportunities for young professionals and even those in mid-career, noting that Islamic finance system was a complete universe or ”ecosystem” that goes beyond Islamic banks to include other areas such as Islamic capital market which has Sukuk as its most popular instrument, Takaful or Islamic insurance, Islamic wealth management and Islamic private equity.

According to him, as the market for Islamic Finance develops in Nigeria, each segment of the market he said would sprout out and branch out to provide potential career paths for young and middle-level professionals.

He outlined that specific specialized careers could include Sharia’ah advisory and auditing, Islamic treasury management, Islamic accounting and reporting, Islamic risk management, Islamic product development and Islamic asset management.

He however noted that harnessing the opportunities in the Islamic finance market might take some time because the ecosystem is currently narrow with only one full-fledged bank, one window operation, one capital market operator and two Takaful operators.

He urged young professionals to position themselves to take the opportunities that would definitely emerge from the sector by pursuing degrees and certifications in Islamic finance while awaiting its development.

 

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