When you hear Non-Interest Finance, what comes to mind?

A free banking product for a select-few? Perhaps a bank product for some religious groups?

We have heard conversations where this aspect of finance has taken up many meanings outside of its core meaning, and this necessitates clarifications.

Because mention it, and many people immediately assume it is religious, niche, or not meant for them. That assumption has quietly limited a system that was actually designed for broader participation and inclusion.

Essentially, non-interest finance is an ethical asset-backed risk-sharing financial system, which originates from the foundations of sharaiah law principles. It is based upon structure, transparency, and understanding the terms and conditions of business compliance, rather than beliefs. Instead of fixed levels of interest, non-interest finance promotes the establishment of modes for profit-sharing, risk-sharing, amongst other things. Therefore, instead of making money from lending money, parties engage actively in trade and commerce, and then profit is shared.

Evenmore, the numbers tell an interesting story globally.  Currently, non interest finance industry is valued at more than 3 trillion dollars and is increasing at a rate of 10 percent annually.

In Nigeria, for example, the Central Bank has a formal recognition of non-interest banking, where products are regulated under the same system as conventional banking. This is not an alternative system operating on the sidelines. It is part of the financial mainstream.

Its appeal is in the predictability and transparency. The costs are agreed on and returns are performance-based. The assets can also be easily identified. All these help to eliminate anxieties that some might have about debts and  interests, especially for those using it for small businesses or long-term planning.

In Africa, particularly in Nigeria, this types of finance provides a number of benefits:

• Ethical Investing: It gives investors an opportunity to match their investments with their ethical values.
• Economic Stability: It helps to maintain stability in financial systems by restraining speculative practices.
• Financial Inclusion: Non interest finance contributes to an expansion of access to financial services for individuals and enterprises that may not have sufficient capabilities for conventional finance.
• Social Responsibility: It instills a feeling of social responsibility by undertaking investments that can contribute to the larger good of society.

Therefore, the real question is not what non interest finance is anymore. What we should be asked at the moment is how much impact this type of finance can create for the larger Nigerian economy.

So, let’s hear your thoughts. What value do you think this aspect of finance can create?