Implementing Islamic microfinance in Nigeria: a matter of equity and social justice

Abstract

Many hardworking people from unprivileged backgrounds are automatically disadvantaged simply because they lack access to financial capital. Observably, microfinance provides a way out of the poverty trap if it is deployed appropriately. Nigeria, like many other developing countries, has thus taken up the challenge of developing inclusive microfinancing initiatives. In the country, funding for small-scale businesses is available from both the government and the private sector. Unfortunately, the nature and conditions of the schemes fail to meet the sensitivities of a substantial group who would otherwise have been eligible for the grants and loans. The practical implication is that such group would be twice excluded from the financial system. These potentially excluded groups are those poor Muslims who might desire funding but are unable to benefit from the government schemes because the loan conditions contradict their faith. It is argued that the effect of the status quo is that it breeds further inequality and inequity and could even amount to outright (or indirect) discrimination. This contention is substantiated through constitutional analysis and also in light of a contemporary economic welfare theory – the Capability Approach. The article argues that this marginalized group has a right to Islamic microfinance. This right, it is further contended, places justiciable (positive and negative) duty on the government. It, therefore, calls that Islamic microfinance should forthwith be embedded into the fabric of public governance in the country. The article demonstrates the exclusionary problem by analysing some of the existing schemes, and it proffers alternative sharia-compliant conditions for existing schemes.

Keywords: Islamic microfinance; social development, distributive justice; indirect discrimination; constitutional law/human right, capability approach