Regulating Islamic P2P Financing In Nigeria: A Case For  A Compliance Framework

Shehu Abdulkadir; Auwal Adam  Sa’ad; Aznan Hassan

Authors

Shehu Abdulkadir PhD Candidate
Auwal Adam Sa’ad Associate Professor
Aznan Hassan Professor

Keywords:

Islamic P2P financing, Compliance Framework, Regulation, Financial Inclusion

Abstract

This study looks into Nigeria's need for a robust compliance structure to regulate Islamic peer-to-peer (P2P) financing. Building on the fundamentals of Islamic finance and taking cues from global best practices in P2P financing regulations, this study suggests a thorough compliance framework customized for the Nigerian environment. A robust framework guarantees the adherence to Shari’ah, safeguard investors, and advances financial stability. This study examines the regulatory gaps in the existing compliance environment, analyzes the difficulties in enforcing compliance, and foresees probable opposition from industry stakeholders. The study adopts a qualitative research methodology approach. It relies on primary data sourced from interviews, and official publications, as well as secondary data from articles, websites, and online resources. This study finds that although the Islamic finance industry in Nigeria has overtime developed, there is nevertheless the need for an end – to – end Shari’ah compliance framework (from initiation to execution and post –execution) for the effective regulation of Islamic P2P financing. Additionally, a suggested model for a compliance framework is presented in this study. It evaluates the framework's effect on the sector and offers insightful information about its effectiveness. This study fills a significant vacuum in literature while also providing policymakers, regulators, and business stakeholders with useful advice for navigating the rapidly changing environment of Islamic P2P financing in Nigeria. This study concludes by emphasizing on the significance of a compliance framework in promoting the expansion of P2P financing in Nigeria that ensures adherence to Shari’ah principles and the protection of the interests of all parties. It adds to the continuing discussion on regulatory innovation in Islamic finance and lays the groundwork for further study and the creation of new policies in this emerging area.

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Author Biographies

Shehu Abdulkadir, PhD Candidate

Institute of Islamic Banking & Finance, International Islamic University Malaysia (IIUM).

Auwal Adam Sa’ad, Associate Professor

Institute of Islamic Banking & Finance, International Islamic University Malaysia (IIUM).

Aznan Hassan, Professor

Institute of Islamic Banking & Finance, International Islamic University Malaysia (IIUM).

References

Book

Abdulkadir, S., Saad, A. A., & Hassan, A. (2024). Islamic Peer-to-Peer (P2P) Financing as an Alternate Model of MSME Financing in Nigeria BT – Islamic Finance: New Trends in Law and Regulation (N. Mansour & L. Bujosa (eds.); pp. 27–37). Springer Nature Switzerland. https://doi.org/10.1007/978-3-031- 48770-5_4

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Conference

Zulkefli, A., & Habibi, N. A. M. N. (2021). Islamic P2P Financing in Malaysia: Shariah Issues and Operational Challenges. The International Islamic Economic System Conference, December 2015, 264–269. https://oarep.usim.edu.my/jspui/bitstream/123456789/13490/1/Islamic P2P Financing in Malaysia%3B Shariah Issues and Operational Challenges.pdf

Document

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Interview

Banking Supervision Personnel. Central Bank of Nigeria. 3rd September 2023

Entrepreneur and Shari’ah Auditor. Islamic Finance Chambers. 30th August 2023

Independent Researcher, Liquidity Management and Alternative Dispute Resolution Expert. International Islamic Liquidity Management Corporation. 2nd August 2023

Shari’ah Auditor. The Alternative Bank Ltd. 5th August 2023

Shari’ah Scholar. Ahmad Bello University Zaria. 10th August 2023.

Journal

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Umar Habibu Umara, & Umar, M. A. (2022). Integrating Islamic Fintech into Islamic Social Finance to Revive the Going Concern of MSMEs in the COVID-19 Era. Global Review of Islamic Economics and Business, 10(1), 1–13.

WijayaC., NugrohoB. Y., & ArkanuddinM. F. (2022). The Analysis of Risk Effect Towards Fintech Ecosystem On P2P Lending Industry in Indonesia. Indonesian Journal of Business and Entrepreneurship (IJBE), 8(3), 481.

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Thesis

Monye, O. F. (2021). Rethinking the legal and institutional framework for digital financial inclusion in Nigeria. Thesis. University of Cape Town (UCT).

Sani, S. D. (2022). Risk-Based Supervisory Framework For Islamic Banks: A Case Study Of Nigeria. Thesis. IIBF-IIUM.