Induction Of A New Islamic Microfinance Model In Nigeria
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 five-man 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 well-seasoned 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 North-Eastern 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 organization 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 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 North-Eastern 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 organization 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.
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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 Sub- Saharan 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 the mini-financial institution at the basic level.
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.
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.
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.
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.
“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.”
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.
“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.”
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.
