•Sanusi urges Shari’ah boards to broaden portfolios to accommodate impact investing
James Emejo in Abuja
Vice President Kashim Shettima, yesterday said the federal government accessed over N625 billion during its sixth Sovereign Sukuk issuance to finance the construction of roads and bridges across the country.
He said the amount represented an increase of 435 per cent compared to N150 billion bonds offered.
Speaking at the opening of the 6th Africa International Conference on Islamic Finance (AICIF) 2023 with the theme: “Towards a Just Transition” in Abuja, the vice president said the federal government remained committed to further designing policies targeted at financial deepening and diversification for unlocking private sector financing.
He said with global assets under management exceeding $2 trillion and the growing demand for alternative sources of financing, Islamic finance remained central to both financial deepening and diversification in the country.
Represented by the Special Adviser to the President on Economic Affairs, Dr. Tope Fasua, the Shettima said, the country’s fast-growing Islamic finance assets remained largely insignificant compared to the over $2 trillion global market, despite Nigeria’s demographic composition and increasing demand for alternative sources of finance including as Islamic finance.
He said the government will continue to explore Islamic finance tools such as Sukuk to tap into local and international investments.
He said, “This shows an increase in the level of public trust and awareness about the financial product. Non-interest banking and microfinance could also potentially serve as a tool to drive industrialisation, SME growth, and micro-credit activities.”
He also said considerations will be made to enhance the visibility of the Islamic finance market in line with global trends within national policy goals for financial literacy, financial inclusion, and the transition to the formal economy of millions of Nigerians in the near future.
These interventions are not just geared towards funding sustainable development projects but also to enable the Islamic financial markets to contribute to our journey to a clean and sustainable future for the country.
He said, “If you have followed our news in the past few days, you may have picked up the visit of His Excellency President Bola Ahmed Tinubu to Saudi Arabia with a team of some of our ministers and businessmen.
“Deals were struck and commitments were made, as President Tinubu assured the leadership of the Kingdom of Saudi Arabia of positive tectonic changes and reforms in Nigeria which has positioned us for new opportunities.
“The Saudi government promised support in oil and gas and banking sector, among others. As a nation desirous of diversifying our sources of finance, and bringing on board every perspective, I want to assure you all that we have only just begun, and a glorious future lies ahead of us and our partners in development.”
This is as the 14th Emir of Kano, Muhammadu Sanusi II, yesterday urged the Shari’ah boards of financial institutions to ensure the fulfillment of the fundamental objectives of Shari’ah, the Maqasid al Shari’ah, in Islamic finance practice.
Sanusi, who gave the keynote address, tasked them to give due consideration to these objectives, particularly during the screening and certification of portfolios and funds.
The former Governor of the Central Bank of Nigeria (CBN) said the negative/exclusionary screening done by Shari’ah boards which exclude certain sectors, companies, or practices from funds or portfolios, could be broadened to include not only the Environment, Social and Governance (ESG) criteria, but also positive and impact-creating screening.
According to him, these objectives include protecting and sustaining faith, life, intellect, progeny, and wealth; pursuance of social justice, facilitating social mobility; attainment of benefit with its categorisation into recognised benefits, classified into necessities, needs and embellishments; and de-recognised benefits, like the benefits accruing from usury and speculative transactions among others.
Sanusi noted that the global economic system had generated unprecedented cumulative wealth and prosperity, and pulled hundreds of millions out of poverty.
However, he said the existential threats of climate change with its attendant increased frequency of natural disasters, rapid depletion of natural resources, rising inequality, and mass migration among others – had created perils of international security, all threatening to undo the remarkable gains recorded in the recent past.
He said the investment landscape was characterized by both investors and managers who emphasize maximising return and giving priority to short-term profits, with no market incentives that focus on the long-term creation of value.
Yet, he said despite the trend, a growing number of investors are making investments with the central purpose of generating positive impact for people and the planet alongside financial returns.
He said, “This practice is known as impact investing; impact investing assets under management are increasing at an estimated 18 per cent per annum among currently active impact investors, according to the GIIN Roadmap.”
Citing the Global Sustainable Investment Alliance (GSIA), he said impact investing is “targeted investments, typically made in private markets, aimed at solving social or environmental problems.
“Community investing, whereby capital is specifically directed to traditionally underserved individuals or communities, is included in this category, as is finance that is provided to businesses with an explicit social or environmental purpose.”
According to the GSIA Global Sustainable Investment Review 2016, Impact investment was estimated to be $248 billion in assets as of 2016, up from $101 billion in 2014, and currently remains the fastest growing part of responsible finance, expanding by 56.6 per cent on an annualized basis.
He stressed that while resources available from government and philanthropy are insufficient, private capital remained essential, not only complementary but integral.
Sanusi said many impact investors have begun to align their portfolios to the Sustainable Development Goals (DGs), as other investors use the SDGs as a means to identify and develop impact investing strategies.
He noted that in a recent GIIN survey, 42 per ent of impact investors reported using the SDGs as a tool or indicator set in their impact measurement and management.
He said, “Impact investment is not without returns or good financial performance. Only 9 per cent of the impact investors surveyed by the GIIN said their financial returns were underperforming expectations, which shows that over 90 per cent are satisfied that their financial returns are performing their expectations.
“Convergence between Islamic finance and socially responsible investing (SRI) including impact investing is growing. The abhorrence of speculative transactions that only enrich investors without connection to the real economy is common to both.