Experts seek legal framework for Islamic finance inclusion

Experts in the financial sector has called on relevant regulatory bodies to raise awareness and create strong legal framework that would help to increase (Sukuk) Islamic financial inclusion in Nigeria.

Sukuk is an Islamic financial certificate, similar to a bond in Western finance that complies with Islamic religious law commonly known as Sharia.
Speaking during the 4th Edition of African International Conference on Islamic Finance (AICIF) in Lagos, Ashraf Amma, director at PWC, Luxembourg said Sudan has continued to be a leader of Sukuk issuance volume in Africa.

He however, noted that sadly, globally, Africa contributed less than one percent in sukuk issuance in 2018, showing that there are lots of untapped opportunities in Africa.He spoke on the need for Africa to have level playing field in taxation of Islamic contracts and the need for more awareness among multilateral development banks and agencies.

Speaking during a panel session themed: ‘Regulatory and Cross Border Issues Affecting the Utilisation of Sukuk,’ Adeola Sunmola, a partner in Udo Udoma and Belo-Osagie’s banking and Finance, power, projects and infrastructure, said there is lack of clarity in Nigerian laws in relation to how Sukuk is structured.

“When there are issues in relation to Sukuk, people often do not know who to run to. There should be clarity on the transaction structure and taxation exemptions. Our laws and regulations are reactionary. We need to be more forward looking in terms of making laws that can adapt to transactions of this nature, so we can understand them when these issues arise,” Sunmola said.

Muhammed Dabai Suleyman, director Central Bank of Nigeria and Head of National Programme for the Financial System Strategy (FSS2020) said Sukuk is needed to fund infrastructure development. Ummanhani Amin, managing partner, the Metropolitan law firm and chairperson 4th AICIF 2019 planning committee said AICIF started because they felt there is a gap in Islamic financial inclusion.

“This is the main reason for the conference and that is why we have been working towards financial inclusion. We are working towards letting everyone know what products to take because people do not understand,” Amin said. She said the awareness process has been gradual in Nigeria because Nigeria is new to Islamic finance.

Abdulkader Thomas, chairman Shariah Board of Sterling Bank PLC noted that some questions raised in financing projects using Sukuk are if the contractor will complete the project as at when due and according to the specifications and integrity of funds.He mentioned some of the liquidity risks in Sukuk to include necessity of secondary market, eligible instrument for trading, source of money, what sukuk represents and what the benchmark is. Chinua Azubike, who is also the managing director Infra Credit said people should be looking at where the market lies and ensure the structure works in compliance with Sharia laws.