Islamic Finance Will Help Nigeria, Others Achieve SDGs–Barau

By Adedapo Adesanya

The adoption of the principles of Islamic finances by developing nations will serve as a key to achieving the United Nations’ Sustainable Development Goals (SDGs).

This was a stance held by the former Deputy Governor of the Central Bank of Nigeria (CBN), Mr Sulaiman Barau, when presenting a keynote paper at the 4th International Conference on Islamic Finance, with the theme Islamic Finance: Mobilizing Resources for Economic and Social Development organized by the Bayero University’s International Institute of Islamic Banking and Finance (IIIBF) in Kano on Tuesday.

He said the deepening global annual investment deficit in terms of long-term investment was a major threat to socio-economic development of the developing nations which had led to the adoption of SDGs by the United Nations.

“The SDGs are only achievable with a sustained mobilization and efficient use of resources and to ensure even economic and social development in which Islamic finances has the capability of paving the way for attaining this,” he said.

Quoting the World Bank 2015 Report, he reiterated that long term finance provides stability for the financial system, which in turn paves way for the provision of the required support during boom and bust economic cycles given their emphasis on long-term value creation, as such, long term financing is therefore critical in eliciting sustainable economic development.

He then noted that the mobilization of finance for long term investments are characterized by challenges to conventional financing sources which include, leveraging, incentives for risk transfer, and the cyclical nature of markets, inadequate savings, weak legal and institutional frameworks and lack of inclusivity among other factors.

Mr Barau then pointed out that the conventional financing frameworks have tendencies to transfer risks because of undue allocation of savings to largely short-term investments which constrains the ability to finance the long-term assets because of the inherent mismatch between funding sources and investments.

“Owing to its risk sharing rather than risk transfer tendencies and, equity participation, has become increasingly important in providing solution to challenges faced in sourcing long term finance under the conventional frameworks, to fund required global requirements for economic and social development,” he added.

He then said the risk sharing feature of Islamic Finance has the tendency to eliminate the risk transfer constraints of conventional financing methods since it will bring about trust in a typical transaction chain.

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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