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

1. Islamic Microfinance Prospect
and Challenges in West Africa
Salaudeen Jubril Abdullah PhD
4th Global Islamic Microfinance Forum
November 1-2, 2014
Dusit Thani Hotel Dubai U.A.E

2. The Objectives
• The aims of this presentation are to explore the possibilities of
introduction of Islamic Microfinance banks in West African
countries, present the need for Islamic Micro-finance banks,
as well as to look at the prospects and challenges that come
with the introduction of the system. Already some few Islamic
financial institutions have begun operations in Nigeria, Guinea
and Senegal, but, they are to some extent at experimental
level. The fact that West Africa has the second largest number
of Muslims in Africa after North Africa should have attracted
the attention of global communities concerned with the
development of Islamic Micro finance world wide. But,
despite the large population not much has been achieved in
the spread of the system in the region, even in Nigeria with
more 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.

6. 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 the
rural areas
• A major consequence of a large informal
sector is difficulty in economic management.

7. Islamic Micro Finance in W/Africa
• The west African region and Islamic Microfinance
need each other for mutual benefits;
• Islamic Micro finance system will help accelerate
the region economic growth and development,
and help reduce inequality and poverty.
• While the region will provide the Islamic Micro
Finance system with new growth area with its
population of over 300 million people.

8. Efforts of past Government
• Some of the programmes tailored to address the
problems of financial dualism, poverty and
unemployment by successive Nigerian governments
are;
• 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),

9. 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 Rural
Development Bank (NACRDB), community
banking and recently microfinance banking.

10. 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 and
among the urban poor
• Religion and Culture of the people are not
considered
• Lack of basic infrastructure

11. The Future
• 70% of the region population is engaged in the
informal sector or agricultural production.
• Conventional microfinance banks in Nigeria serve
less than one million people against the over 40
million that require their services.
• Enormous market for Islamic microfinance banks.
• 65% of the entire population of w/Africa has no
access to banking services
• There is an enabling law for Islamic Microfinance
in Nigeria, so it is with other countries in the
region and at worst discussion has commenced.

12. Challenges
• The region is face with,
-regular changes in government policies,
- lack of requisite human capital,
- infrastructural inadequacies and socio-cultural
misconceptions.
- banks are further inhibited by corruption -
frauds and forgeries and poor corporate
governance.

13. Conclusion
• The capacity building for the practitioners
• improving social infrastructure in the country.
power supply constitutes huge cost to
microfinance banks.
• Training of clients in financial literacy before
disbursing loans.

14. End of Presentation
Thank You