Diversification of Islamic Financial Insturments
45
The shares and sizes of these products in the entire Islamic banking segment are displayed in
table given below:
Table 18: Sizes and Shares of Financing Products (Corporate and Retail)
Financing by Islamic Banks as at December 31, 2015
FINANCING MODE Local Currency
(Million Naira)
Dollar
Equivalent
(Million $)
% OF TOTAL
FINANCING
Murabahah Receivables 12,290.25 40.30 47.45
Musharakah Financing 653.18 2.13 2.52
Qard Hasan Receivables 147.24 0.48 0.57
Istisna Investments 781.90 2.57 3.02
Ijarah Assets
Investments
12,028.84 39.50 46.44
TOTAL FINANCING 25,901.42 84.98 100
Source: Computed from Annual and Management Accounts
From above table it is obvious that the retail financing products dominate the market with
Murabahah and Ijarah accounting for 47.45% and 46.44%, respectively, while the corporate
financing which mainly consists of Musharakah and Istisna accounts for only 2.52% and 3.02,
respectively. The following are some of the issues and benefits that account for this financing
trend in Nigeria:
(a) The use of Hamish Jiddiyya (Down Payment) in Murabahah to secure the promise to
purchase
(b) Mark up is defined considering historic market trend and tenured as much as possible
for shorter period thus encouraging fixed income instrument like Murabahah
(c) Accurate forecast of income in view of the fixed income nature of the preferred
financing products
(d) In an Ijarah contract the customer maintains the asset in protection of the interest of
the Lessor at his expense except in cases of any accident due to natural
calamity/disaster (Acts of Allah) which has to be ascertained by the banks.
(e) Use of Takaful cover as a mitigant to natural disasters.
(f) Longer gestation period of project normally financed through either Istisna or
Musharakah discourages Islamic banks from using such products.
(g) The Islamic banks lack the expertise to appraise and monitor projects and this
discourages them from financing such projects through either Mudarabah or
Musharakah
Thus in Nigeria, the Islamic banking industry is dominated by retail financing (Murabahah,
Ijarah and Qard Hasan ) accounting for about 94.46% while the corporate financing
( Musharakah and Istisna) accounted for only 5.54%.