NAICOM strengthens Islamic finance option

The National Insurance Commission (NAICOM) said that conventional financial systems fall short of addressing the multifaceted risks individuals and communities face, hence the need for the Islamic finance option.

This, the commission revealed at the second edition of the African Takaful and Non-Interest (Islamic) Finance Conference themed: ‘Islamic Finance and Takaful: Building Resilience in a Volatile World’ held in Lagos.

The regulator said as countries continue to navigate an era marked by economic volatility, environmental challenges and social disruption, there is a need for innovative solutions to expand the African market.

The Commissioner for Insurance, Olusegun Omosehin, who was represented by the Deputy Commissioner (Technical), Dr Usman Jankara, said that while conventional financial systems often fall short in addressing the multifaceted risks faced, Islamic finance offers a unique perspective rooted in ethical principles and social responsibility.

According to him, Islamic finance is not merely a set of financial products but a comprehensive system promoting fairness, transparency and risk-sharing across the market.

Jankara noted that at its core, Islamic finance encourages investors to consider the social, ethical and environmental implications of their financial decisions, he said.

“This holistic approach is particularly relevant today, where the consequences of financing extend beyond mere profit and loss. However, it is driven by increasing demand for Shariah-compliant financial services. And Islamic finance in Nigeria is growing rapidly.

The sector accounts for approximately two to three per cent of Nigeria’s total financial market, valued at $3.8 billion. Sukuk dominates the market at 59.3 per cent, followed by non-interest banks at 39.8 per cent and Islamic funds and Takaful at 0.9 per cent.

“The Islamic financial industry comprises four non-interest finance banks, five Takaful companies, 15 microfinance institutions, and 10 non-bank financial institutions. Central to Islamic finance is the concept of Takaful or Islamic insurance. Unlike conventional insurance, which often involves risk transfer and interest,” he said.