Finance & Banking

BANKING THE UNBANKED: A PERCEIVED RECIPE FOR POVERTY ERADICATION PROGRAM INDUCTION OF A NEW ISLAMIC MICROFINANCE MODEL IN NIGERIA Olorogun, L.A.M Business Division ADMC,Higher Colleges of Technology Abu Dhabi UAE

A new Islamic microfinance model – entitled
Manara Project – was developed in Nigeria. A
popular and famous Islamic group was used
as a Close User Group (CUG). The CUG is an
Information Technology (IT) platform created
by EasyGIS Limited – a consulting firm based
in Kaduna State Northern Nigeria – for mapping
mosques and members of a religious charity
called lzalat Bid’a Wa lqamat Sunna (JIBWIS).
Through this platform, JIBWIS represents
leadership that has agreed in principle to
reposition itself in contemporary Nigeria
beyond missionary activities to foster economic
and financial propagation among its members.

The Manara Project was formed and detached
from the JIBWIS administration. Every JIBWIS
office was requested to form and present a fiveman committee as part of the Manara Financial
Inclusion Project. In fear of lack of competency
and fidelity (BFM personality variables) etc. a
three-day financial induction programme was
held for the selected Manara officials. Each state
official was strictly selected according to prior
set conditions. Manara officials comprise of a representative of JIBWIS’s Imam Committee,
a representative of JIBWIS’s administrative
committee, a representative of JIBWIS’s First
Aid Committee, a computer literate, and wellseasoned and trained managerial personnel. In
addition, a national Manara Project seven-man
committee, selected from JIBWIS’s national
committee, was constituted to oversee the
state officials’ committee’s projects.

The Manara Project idea was prompted by the
harsh realities of microfinance across the globe
particularly in developing and under-developed
countries. Previous literature highlighted the
need to reverse the state of affairs of the
current microfinance system which has landed
many in the affected countries in greater debt
and has worsened poverty. This has distanced
many Nigerians from engaging in conventional
banking and financing. Nigerians often prefer
the traditional banking and finance systems
such as Esusu (informal finances in Nigeria) or
mutual weekly contribution amongst peers and
friends.

The Manara Project promotes the culture
of a true Islamic finance that excludes any
usurious lending or interest-based financing.
It seeks to foster stronger brotherhood among
its members where donations are modelled
after the early Islamic Bayt al-Mal model. With
JIBWIS’s multimillion membership across towns
and villages in Nigeria, the Manara Project
demands professional management.

The concept of relationship in management
specifically relationship marketing, was first
mentioned in marketing literature around
two decades ago wherein personality trait
is a vital consideration. Some of the main
motivators, such as intense competition
among organizations in the same industry and
demanding customers, are the reasons why
labour or relationship marketing has increasingly
attracted the attention of researchers and
practitioners alike. Thus, customer loyalty
is a core goal of organisations (Christopher
et al, 2004). Many studies have posited that
profitability of an organisation depends on the
degree of customers’ loyalty.

After this introduction, this note attempts to
evaluate the effects of induction and training
programmes of a Closed User Group (CUG)
seeking to foster better personality traits in
a new Nigerian Islamic microfinance model.
Despite existing research on personality traits
in financial organisations, the majority of such
research literature concentrated on the general
Western view of personality without considering
specific cultural or religious variables, especially
the new model of Islamic financing.

The induction programme’s materials were
designed with the view of inculcating reputable
personality traits into the participants. This is
important because reports show that Nigeria
has a high rate of illiteracy, especially in NorthEastern Nigeria where Western education is
largely prohibited. After retaining the BFM
variables, our model added the Islamic religious
values. The actions of employees are driven
by many factors, which have been debated
extensively in both psychological and economic
disciplines, especially those actions related to
employees’ relationship with their organisation in helping the organisation realize its objectives.
Individuals have different instincts that
subsequently determine the personality of such
a person or the way the person acts or reacts to
his/her environment.

The results offer useful insights regarding
the need for additional models of Islamic
microfinance systems. Our analysis of the
Manara Project, which involved the grassroots
members of numerous Nigerian communities,
discovered that educational background might
have no serious effect on the personnel. Our
results showed that the induction programme
could serve as one remedy for illiteracy in
Nigeria. This may also be true for other SubSaharan African countries.

Therefore, it suggests that for Islamic
finance to be successful in Nigeria there must
be educational or literacy transformation at the
grassroots level. Since literacy, as discussed by
previous literature entails both hereditary and
experience, training and induction programs,
would serve as one of its natures. The
experience itself should focus on management
with emphasis on finance and particularly Islamic
finance. There is urgent need to capitalize on
instilling the BIG FIVE variables as well as Islamic
orientation into the aspiring future Islamic
finance professionals. Recruitment should not
be based on educational qualifications, rather
a proper criterion should be adopted for the
selection of the zealous participants.

However, such a programme must be
well arranged. There is some evidence that
the programme location served as one of
the motivational factors for the participants.
Providing accommodation encouraged
participants to postpone other responsibilities
and participate in the three-day programme.
In addition, facilitators played a pivotal role
as the participants found the programme
interesting, stimulating, and motivational which
empowered them with new skills and prepared
them for future leadership roles beyond the
Manara Project. In light of this, factors such as
“educational” stood out as a superb determinant
contributing to the success of the model. The
induction programme achieved its objective of
educating the laymen on engaging with mini
financial institution at the basic level.

Implications of this programme in upgrading
and standardizing of the educational curriculum
in Nigeria are beyond exaggeration, because
even educated participants were convinced
that their views on financial systems were
transformed from negative to positive. This
highlights the need for including this type of
financial management orientation programme
into the Nigerian educational system, at least
at the senior secondary school level given that
on average 60-70% of the senior secondary
school leavers would not make it to tertiary
institutions due to financial constraints and
other reasons. Even in Malaysia where there
are number of experts, in Islamic finance,
reports and complaints of Hisham (2015),
Annuar (2015) and as well Taap and al-Awar
(2015) in the Islamic Finance News’ Magazine
indicated the utmost importance of upgrading
our educational systems. The sample group
also agreed that this induction programme
was timely in the wake of increasing poverty
in Nigeria. One of their conclusions was such a
vital program such as the Manara Project should
be open to all communities and beyond JIBWIS’s
CUG. By this, it is posited that communities can
be regrouped according to the CUG ideology.
This would bring like-minded people together
as well as ensure their inclusion in leadership
and problem-solving programmes. Eventually,
more induction programmes would be needed
and Nigerian communities would be educated in
the same way the participants have benefited.

Policy wise, the Nigerian government needs
to look beyond common forms of microfinance
and develop financial inclusion at the grassroots
level where members of communities would be
the managers of the microfinance institutions
based on CUG cooperation. Current financial
inclusion programmes segregate between
the financial institutions which are basically
conventional oriented and thus prioritise
profit over community service. Advancing
interest-based loans to businessmen is the
only mechanism adopted by these financial
institutions. While the majority of Nigerian
businesses are small scale in nature and require
stable infrastructures for steady growth and
development; Nigerians are overwhelmed
by the lack of infrastructure facilities such as
electricity, roads etc. making their survival
extremely difficult.

Whereas repayment of loans with interests is
an obligatory responsibility, inability to honour
the contract at the appropriate time would lead
to confiscation of property or the entire business
venture and perhaps jail. Many Nigerians fear
losing their collateral in an uncertain business
environment like Nigeria.

The funds under the Manara Project were
generated and managed by the community
members and overseen by appointed officials.
These results were similar to Khan’s (2008)
proposed microfinance model for Pakistan.
Khan argued that the only way to manage
rampart microfinance failures is the inclusion
of charity into microfinance programs. This
is the major operandi for the Manara Project
where members’ “rich/affluent, average and
poor” contributions are regarded as charity.
The usage of these funds is a collective project,
such as for community hospitals, and consumer
food chain stores selling various local raw foods
at a discounted rate for registered members
etc. It would surely serve as an antidote to Tan’s
(2017) concerns about shrinking job markets,
particularly in banking and finance profession.

Similarly, it embraces Berisha’s (2017)
opinions of continuous development, creation
of attainable new business models, education
and training as antidotes to uncertainties facing
the financial markets across the globe. Thus,
the current programme also includes individual
funding of feasible projects for technicians
and traders. These groups form the majority
of all communities in Nigeria. The individual
beneficiaries would pay back their loans
through the donation process as charity without
interest. These projects have immediate effects
on members of the communities, particularly for
the Manara members. Funds are advanced for
projects without interest and members donate
funds without seeking profit on investments.
Further, the inclusion of the grassroots members into financial development project
would boost the Nigerian Central Bank’s efforts
in implementing the World Bank’s financial
inclusion and poverty eradication programmes.

The results further showed that educational
background was not a barrier to the recruitment
of officials. The induction programme’s manual
and materials were prepared in English; however,
the discussions and presentations were in the
local language, particularly Hausa. Participants
indicated that repeating the programme is
important for the success of Islamic finance,
particularly microfinance programmes. Another
cogent observation was that the Manara manual
was distributed to the participants as a guide
for the operations of the officers involved and
was well received by the participants.

Thus, orientation and re-orientation
programmes would be ideal activities for the
Nigerian Islamic financial industry. Lack of both
human and other resources is one of the major
concerns facing Islamic finance in Nigeria. The
majority of the market players are unclear about
Islamic injunctions on contemporary Islamic
commercial contracts. Front-liners are mainly
conventional oriented with a limited number of
qualified Shari’a scholars. This has led to qualified
scholars serving multiple competing financial
institutions. Islamic financial institutions
particularly in Nigeria currently mobilized funds
to focus on an undefined microfinance lending
with returns almost similar to the conventional
microfinance (see Khan 2008). However, the
Manara Project’s mobilization of funds would
be through donations. This is similar to the early
Islamic Bayt al-Mal funds mobilization. These
funds are thereafter returned to the society and
community for the betterment of both the rich
and poor.

Trustworthiness would be achieved without
extra expenses because the custodians are
the donators of the funds. Participants were
reminded of the consequences of failure of
the Manara Project to Islam and Muslims in
general. Thus, the success of Manara or Islamic
financial institutions depends on the honesty
of the professionals. Officials are committed
to achieving the goals of the project with
little consideration for remuneration. This
was because they realized the importance of
community services through the discussions
on Islamic ethics, the Qur’an, and Prophetic
traditions on helping one another in piety and
goodness. Speakers at the orientation should
be experienced professionals in both Islamic
and conventional finance. This will eradicate
the current gaps in the Islamic financial industry
where the Muslim scholars have no or little
knowledge of conventional finance. Bridging
the gap would also extend to the conventional
finance background professionals, with little
or no knowledge of Islamic jurisprudence. The
Manara orientation and induction programme
benefited from those professionals with
both Islamic and conventional qualifications.
In addition, local trainers are preferable to
foreign trainers or professionals. Brevity and
accuracy are fundamental qualities of such
trainers, including knowing the demographic
backgrounds of their trainees.

The results further confirmed that financial
management and operation with embedded
psychological discipline is a vital tool in changing
perceptions and obsolete thoughts on finance
and financial institutions among local Nigerians
(the grassroots members of the society). When
presented with a brain-storming project on
investment on an island, participants’ views
shifted and broadened.

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