Prof. Dr. Mohamed Aslam Haneef Dr. Aliyu Dahiru Muhammad Prof. Dr. Ataul Huq Pramanik Asst. Prof....

Prof. Dr. Mohamed Aslam HaneefProf. Dr. Mohamed Aslam HaneefDr. Aliyu Dahiru MuhammadDr. Aliyu Dahiru Muhammad

Prof. Dr. Ataul Huq PramanikProf. Dr. Ataul Huq PramanikAsst. Prof. Dr. Mustafa Umar Asst. Prof. Dr. Mustafa Umar

MohammedMohammedBr. MD. Fouad Bin AminBr. MD. Fouad Bin Amin

Introduction Objectives of the Study Methods used Research Findings from quantitative data Research findings from qualitative data Implications and Concluding Remarks

Outlines

Other issues discussed:Lack of Takaful Coverage lack of shariah complianceHuman Resource DevelopmentLimited products and lack of Takaful coverageHence the proposed IWIMM

Overcoming Primarily problems of High cost of financing and Lack Human Resource Development

Country Year Population Land Mass

(36 States plus Abuja)

GDP Per Capital GDP

Muslims population

Economic Growth

Nigeria 2014 168.8million 923,8000Squarekms

244.trillion USD (2012)

1400USD

Approximately 55%

7% (2013)

Some Facts and Figures about Nigeria

.

Country Year Population below 1.25$ per day (%)

Poverty Gap at 1.25$ per day

(%)

Population below 2.0$ per day

(%)

Poverty Gap at 2.0$ per day

(%)

Resource Shortfall under 1.25$ per day (as % of GDP

Nigeria 2014 68.8 33.7 84.5 50.2 Appr.4.5

Some Facts and Figures

Source: WDI, 2014Note: Resource shortfall was calculated by the researcher

The study focused on Kano, Nigeria, a commerce centre in the federation with large number of micro-entreprenuers as well as the most densely populated Muslim community in the country.

The state has population size of around 10 million people which is the largest in the country

The sample size used is 248.◦ 148 from Zakah and Hubsi Commission◦ 100 from Grassroot Microfinance Bank, Kano

Demographic Variable Frequency Percent

Gender Male 63 25.4 Female 185 74.6Age Group 15-29 years 63 25.4 30-44 years 110 44.4 45-59 years 59 23.8 60-64 years 16 6.5Marital Status Single 25 10.1 Married 157 63.3 Widowed 49 19.8 Divorced 16 6.5 Single parent 1 0.4Family Size Below 5 102 41.1 5-7 71 28.6 8-10 48 19.4 Above 10 27 10.9

Profile of The respondents

About 75% are women About 68% at the age of 30-59 years 63% married while 20% single mothers. 30% have family size of 5-7 and 30 % with 8

and above.


Level of Education Informal education 1 0.4 Islamic schools/Madrassa 129 52.0

Primary school 24 9.7 Secondary school 54 21.8 Diploma/college 7 2.8 Tertiary institution 5 2.0 Others 28 11.3

Have you taken any vocational training Yes 46 18.5 No 202 81.5

Education and Training

About 52% have considered themselves as products of Islamic schools (madrassa) either because they only underwent such schools or the effect on them dominates.

Only 10% and 21% undergo primary and secondary schools respectively

As far a s vocational training is concern, more than 80% have not taken it. This requires more from the microfinance institutions for effective poverty reduction


The Study was conducted between February to April, 2014.

Given the experiences in the previous studies in other countries, the instruments were fully developed and slightly modified with Prof. Shirazi and the IIUM team


5 Research Assistants were trained in 3-4 sessions for a better understanding of the instruments and techniques of collecting data from the respondents

After the training, each enumerator was asked to go and find a respondent as a trial for improvement.


The total number of sample size was 248, and data were collected from different places in Nigeria. Hence, this number of sample size followed the rule of thumb for determining sample size which should be larger than 30 and less than 500 (Roscoe, 1975;Bougie and Sekaran, 2010). This demographical profile included gender, age, marital status,family size, level of education, and vocational training.


According to Malhotra (2010), reliability refers to the extent to which measurements of the particular test are repeatable. Hair et al. (2010) says, reliability is an “assessment of the degree of consistency between multiple measurement of variables”. In other word, reliability is the degree of uniformed results on repeated trails given by an instrument measure (Bougie and Sekaran, 2010).


The most popular method of testing the reliability of questionnaires is internal consistency, or Cronbach’s alpha (Hilton et al., 2004).

Cronbach’s alpha was used to test internal consistency of 16 items for all dimensions.

Table 2 illustrates the Cronbach’s alpha for six dimensions of integration of Waqf and Islamic microfinance in Nigeria. The alpha values ranged from 0.808 to 0.980, exceeding the minimum requirement of 0.70 Cronbach’s alpha. Thus, all research items and overall instruments were considered highly reliable.


Dimension No. of items Cronbach

Alpha

Islamic Microfinance 07 0.917

Project Financing 07 0.934

Takaful Financing 09 0.808

Waqf Resources 06 0.980

Human Resource Development 11 0.933

Poverty Reduction 06 0.832

Reliability of the Constructs

Fit Indices/Variable

s

CMIN/DF CFI RMSEA

Waqf 2.51(5)

0.99(0.95)

0.078 (0.08)

Islamic Microfinance 2.38 (5)

0.93(0.95)

0.075 (0.08)

Takaful 2.51 (5)

0.99(0.95) 0.078(0.08)

Project Financing 2.04 (5) 0.99(0.95) 0.066 (0.08)

Human Resource 1.64 (5)

0.99 (0.95) 0.051 (0.08)

Poverty Reduction 1.51(5)

0.99 (0.95)

0.046(0.08)

Figures in parentheses are the benchmarks acceptable for each indicator

Fit indices for the Variables

Chi Square = 1124.071df = 388p = .000Normed Chi Square = 2.897CFI = .915RMSEA = .088

WR

WR6err1

.79WR5err2

.96WR4err3

.98

WR3err4.99

WR2err5 .96

WR1err6

.95

IMF

IMF6

err7

IMF5

err8

IMF4

err9

IMF3

err10

IMF2

err11

IMF1

err12

.68.71.82.84.82.74

err13

.65 .50

.50

.35 PF

PF3

err14

PF4

err15

.81

PF5

err16

.80

PF6

err17

.90

IMF7

err18

TF

TF4

err19

TF5

err20

TF6

err21

TF7

err22

TF8

err23

.86 .96 .95.92 .77

.32

err24

err25

.38

.32

PR

PR1 err26.93

PR2 err27.61

PR3 err28

.53

PR4 err29

.78

HRD

HR4

err30

HR3

err31

HR2

err32

HR1

err33

.85.89.96.89

.53

err34

err35

.25.23.31

.24

.37

.73

.73 -.23

.55

.20

.78

Full Fledge Structural Equation Model for IWIMM

Fit Indices Cut-off Observed Value

Decision

CMIN/DF 5 2.897 Accept the goodness of fit of the model

CFI 0.90 0.915 Accept the goodness of fit of the model

NFI 0.95 0.95 Accept the goodness of fit of the model

RMSEA 0.08 0.088 Accept the goodness of fit of the model

Overall Fit indices for the Model

Hypothesized paths Coefficient

(β)P-value

(sig.) Remarks

H1 Waqf Resources → Islamic Microfinance 0.315 0.001 Supported

H2 Islamic Microfinance → Project Financing0.324

0.001 Supported

H3 Islamic Microfinance → Takaful Financing0.202

0.001 Supported

H4 Islamic Microfinance → Human Resource Development

0.527

0.001 Supported

H5 Project Financing → Takaful Financing0.735

0.001 Supported

H6 Takaful Financing → Poverty Reduction 0.3730.001 Supported

H7 Project Financing → Poverty Reduction -0.2310.035 Supported

H8 Human Resource Development→ Poverty Reduction 0.5480.001 Supported

Hypotheses Tested

As illustrated in Figure 1 above the R square values for the five dependent (endogenous) variables were poverty reduction = 0.40, takaful financing = 0.67, human resource development = 0.27, project financing= 0.10,and Islamic microfinance investment = 0.10 which indicated that dependent (endogenous) variables moderately explained by the independent (exogenous) variables.

Based on the SEM analysis it was observed that all eight hypotheses were supported in the SEM model at 1% and 5% significant level. However, project financing have negative influence on poverty reduction in Nigeria through integration of waqf resources and Islamic microfinance investment.

This may be due lack of its application in the microfinance sector in Nigeria

Hypotheses

For the qualitative data, 8 interviews were conducted with the followings

For the focus group about 15 participants were invited, though attended by more than that.

Summary and extract were provided below.

Qualitative Findings

S/N Name Designation Institution

1 Alhj. Baffa Saleh Director Operations

Zakah and Hubsi Commission Kano State

2 Farida Tahir CEO Grassroot Microfinance Bank, Kano

3 Dr. Azeez Asif Director Al-Hayat Microfinance

4 Rabiu M. Yar`adua Manager Development Finance

Central Bank of Nigeria

5 AbdulRahman Wacchiko

Deputy Director Social Safety Nets

NAPEP

6 Alh. Amusa Bhadmus

Chairman Al Barakah Multi-purpose Co-operative Society Limited

7 Ibrahim Kantudu Director, Zakat Zamfara Zakat and Endowment Board

8 Sani Muhammad Director, Waqf Zamfara Zakat and Endowment Board

R1: “The idea of supporting microfinance with bank, I mean, waqf is really a welcome idea. To me, I feel it will really alleviate the sufferings of the needy and develop people.” Baffa Saleh

R2: This fund may come in as low cost to the bank because they will come in the form of donation, some will come in form of grant. If you have such fund then it will reduce the high cost of fund that the conventional microfinance banking sector is suffering from.” Farida Tahir

Microfinance and waqf fund

R5: “The major problem is lack of integrated model like this. That is a very creative and reliable sources of supportive funds which is very critical in micro-financing because if you only based on equity fund, shareholders who are after gain... financing your projects .. it will be really difficult to achieve poverty alleviation targets from that angle where there is no supportive funds.”Bhadmus


R1: “Honestly, I don't support the idea of it will make someone to be idle and lazy. Honestly, the system will definitely, instead of , making somebody to be lazy, it will even make him to be productive, as a Muslim.” Baffa Saleh

R2: “I don’t think it is going to encourage laziness because in dealing with our clients we do verification. We give this loan those who are qualified.” Farida Tahir

R5: “I don't believe that. I believe that you see, microfinance is supposed to be for the people in the grassroots. It is the people with many activities. It is not a major component so to speak and this set of people, I think what is most important is the training.” Wachiko

R6: “Yes. Actually it can be. In this regard we should know who are really in business. there is a parameter of analysis those who have been working for last 5 years even we take a year, we can check their records, if we see actually they are doing we can well know by statistics and rigorous assessment.” Bhadmus


R2: “Because they don’t have alternative. You know, this category of business people or client, they are lacking adequate financial literacy. So, once they understand that would be better off, that would make them to create wealth, definitely they will ignore the only option they are forced to.” Farida Tahir

R5: “What I think that will be already a partnership in the sense that the cooperatives go to the microfinance banks and giving access to deposits that are using it for economic activities it is already a partnership between the cooperative and microfinance banks.” Wachiko

R6: “Microfinance cannot really work in partnership because most of the clients are needy and they are operating in non-skill manner, they don't keep proper record of transactions. they are free to take capital from their business anytime they want. ...

R2: “Well, I think there are so many options that IsMF can offer project financing like istisna. I have just mentioned now and then there is musharaka contract .” Farida Tahir

R5: “, I think it is already a partnership Microfinance banks can contribute to business.. cooperative also can engage in different activities that is the way I see it” Wachiko

R:6 “Setting of business but if financial institutions would like to give, they are expecting to change their attitude. The only way we can do is to give them loans. Only Islamic financial product like Murabaha is workable here.” Bhadmus

R1: “First and foremost we have to enlighten the wealthy individuals, the government, and the entire people of the state. the importance attached to the integrated model” Baffa

R2: “Well, the challenge number one we don’t have a complete legal framework, or you can say approved legal framework for our operation…awareness, attitude…” Farida Tahir

R5: “Well. The model is okay except that like I said earlier on the model is based on a lot of interfaces, a lot of interactions between the people who are going to benefit and those who are going to give the funds…people have to e educated to avoid seen it as a national cake…”Wachiko

R6: “The challenges are: one is ‘lack of legal framework’ everybody is sharing this view. The second challenge is ‘lack of manpower’. People still don’t know what IMF is all about. ..shortage of funds” Bhadmus

R1: “We introduce the system of empowering the needy one . the system of empowering needy in the sense that we train them , we get them training, you know, on a profession like , you know, a very simple especially to the widows.” Baffa Saleh

R2: “It is going to help a great deal…but if you don’t train them, they don’t know how to collect the money and how to manage them. So don’t blame them.” Farida Tahir

R5: “If they go to training and see that as beneficial and they learn the basic aspects of book keeping how to record profit and loss. How to improve the quality and quantity of their produced goods. I am telling you everybody will be happy. It is going to be win-win for all the parties.” Wachiko

R6: “MF supposed to be targeted upon to improve the skill of the clients. Because popular saying is ‘Knowledge is life and power’. So those who have power, courage, they can take initiatives... Let them know how they can keep their records. In this regard, there will be a lot of institutional mechanism..” Bhadmus

R1: “I honestly support the idea where giving them training before collecting the fund. Yes, it is a welcome idea.”Baffa Saleh

R2: “Exactly. It should be a strong condition because in fact according to Central Bank of Nigeria (CBN) regulation, pre-disbursement training is very very important. It’s a condition” FT

R5: “That’s the best way to go about it because if a person does not go to any training, he will not understand what we are trying to introduce, but once they have been trained…” Wachiko

R6: “Yes, of course. You can do that. Before MF to operate and properly function, we need to train our clients. In fact, we train our clients. We gave them various training for some time in order to improve their skills. After training, we see the affects are different.” Bhadmus

R1: “…in the course of the payments at least we can equally tell them that they should give us some sort of sadaqah so that we can also meet the demand of those who are in need of money desperately.” Baffa Saleh

R2: “It is very fantastic. In fact, in this bank we have come up with something called Base Banking. Base Banking involves promotion of togetherness. People living together in the same community. They don’t have to come to the bank to access financial assistance. We try to encourage them to work as group among themselves. .. We have made it compulsory for them to have common saving in terms of social welfare; which they contribute on weekly basis.” FT

R5: “People, Muslims as well as non-Muslims, are in our ??. Muslims give sadaqah, Christians give tithe. This is already established in Nigerian culture that people are willing to give something to charity. .. we should motivate people to willingly donate some part of their profits they have generated to improve their community, to improve the livelihood of other people

R6: “Immediately when they start to feel that they are okay, they can also accommodate others... So give them spiritual training.” Bhadmus

S/N Issue Remarks

1 Waqf to subsidize microfinance Desirable

2 Attitudunal Problem due to subsidy Most likely not

3 Project Financing as a preference Generally not preferred; loans more commonly

used4 Musharakah Mudharabah, Ijaraah etc Possible with

cautions5 Challenges of the Proposed Model Awareness,

training, attitude, funds availability,

Regulation6 Human Resource Training Various types of

training as a must7 Pre-Disbursement Training Compulsory

8 Takaful and supporting others Highly desirable and humanly

Summary Table

Waqf Based Islamic Microfinance model is applicable in Nigeria as some elements are already on ground such as waqf (GRMB has RM260,000 to disburse from 2 philanthropists)

Comprehensive Regulatory framework is needed for effective application of IWIMM

Awareness constitute a major area of emphasis for stakeholders particularly on partnership issue

For the implementing institutions, screening and pre-disbursement trainingbecome very important

For the funding agencies, collaborations with other agencies is very crucial to achieve the goal of poverty reduction

Waqf (plural awqa f) as an Islamic endowment can significantly play a greater role in poverty reduction in Nigeria

IWIMM will be more effective if regulatory framework is strengthened to allow Non-Interest microfinance just as there is Islamic banking regulatory framework

Human resource development for all stakeholders including the clients and providers need to be enhanced.

For clients, capitalizing on the CBN pre-disbursement training requirement could improve the performance of Islamic microfinance.

Conclusion

Prof. Dr. Mohamed Aslam Haneef Dr. Aliyu Dahiru Muhammad Prof. Dr. Ataul Huq Pramanik Asst. Prof....

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