Microfinance in Nigeria and the Prospects of Introducing its Islamic Version there in the Light of Selected Muslim Countries' Experience

Publication Date: 2008
Published by: Kuala Lumpur, Malaysia: International Islamic University Malaysia (IIUM)
Document Type: Paper

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Islamic microfinance or conventional microfinance – What works in Nigeria?

This paper argues that existing microfinance in Nigeria serves only a fraction of potential clients and proposes Islamic microfinance as an alternative to conventional microfinance in Nigeria. It further states that:

• MFIs in Nigeria charge interest rates as high as 100% and pay as low as 5% on savings which aggravates inequalities in wealth distribution;
• Addressing the situation inadequately would further slow down the country’s development;
• Nigeria has a Muslim majority that mostly rejects conventional interest-based microfinance and therefore, represents potential for introduction of Islamic microfinance;
• Islamic MFIs offer different products and serve as an alternative to the conventional model;
• Poverty-focused MFIs can provide finance to microentrepreneurs, helping them increase their income and wealth levels.

The paper relies on sources from Shari’ah law, secondary data from journals, periodicals, conference proceedings, text books, internet search and other sources of published data to support its argument.