Why Should Islamic Finance Institutions Give Priority to Women?

Financial inclusion, wealth creation, increased economic activities, and financial stability for households are part of the benefits derived from strategic funding and support to women entrepreneurs by Islamic finance institutions.

Mrs. Momoh Adogie- Amametu, Lead stakeholders engagement officer at the Institute of Islamic Finance Professionals, IIFP, made this point while giving her views on “Islamic Finance as a Tool for Women’s Empowerment”.

According to her, Islamic finance is critical in improving women’s finance due to its alternative means of financing and the fact that it is shariah inclined.

She said the introduction of Islamic finance wealth and its principles has made it possible for Muslim women and the general public to do business.

Speaking on the impact of Islamic microfinance on women entrepreneurs, she said the focus of  Islamic finance is to distribute wealth and lift people out of poverty.

She noted that Islamic finance could enhance their ability to support economic development for a nation, with women constituting 52% of the population. She cited a study from Malaysia that revealed 45-55% of the formal SMEs in emerging markets do not have access to funding from institutions. She called on all Islamic finance institutions to consider micro-businesses as part of their funding plans to achieve social impact.

She listed the s challenges women entrepreneurs in Nigeria face obtaining finance:

• Lack of access to funds
• Inability to access training and equipment
• Social norms and tradition
• Doubt about the competence of women in doing business
• Lack of role models in business and finance

According to her,  the IIFP provides role models for emerging businesses and calls for more women entrepreneurs in society. Women should also try to overcome some challenges.

Looking at Islamic finance’s role in financing women entrepreneurs through its microfinance products, she highlighted Mudaraba, Musharakah, Murabaha, Ijara, and Wakala.

For Mudaraba, it is a partnership with profit whereby one party provides capital and the other skills & labor. In the case of Musharakah, Mrs. Amametu pointed out that the contract profit is shared between both lenders and the borrowers, as they both have a capital contribution.

She described Murabaha as the most used product by Islamic banks and microfinance institutions to support businesses, especially those that women own.

Ijara, according to her, provides the opportunity for the lender to buy goods and lease them to customers for a rental fee. However, Wakala is a contract where a party acts as a principal or agent.

On the outlook for 2022, she said several key developments would shape women-owned businesses in 2022 and ways Islamic financial institutions can deepen support for them, which include;

• The need to create an enabling environment for businesses
• Developing the industry and market- The government has a role to play.
• The need to increase financial stability
• The need to create more awareness on how women can access funds that can empower them financially