Informatics Publishing Limited

Abstract

This piece of research work empirically examined Islamic / non-interest rate banking as a springboard of SMEs’ investment and poverty reduction in Nigeria. The study’s main objective was to explore how the non interest-rate participating financing model could promote small-scale entrepreneurs’ investments and poverty reduction in Nigeria by developing a sound theoretical model and framework. The research work used a quantitative approach of empirical analysis by obtaining data from CBN statistical bulletin (2014). The research work clearly revealed that commercial banks have failed woefully in the exercise of providing credit needs to this subsector of the economy. This study concludes that with the establishment of Islamic financing and banking, the era of small-scale enterprise operators subjecting themselves to the economic agony in the hand of the reigning microfinance institutions popularly referred to as “Gbe omu le lantern” would be winded-up if they could exploit this alternative financing means. The study recommends among others that adequate insurance mechanism and workable guideline should be put in place for this financing option by the CBN considering the fact that this mode is prone to high default rate. Finally, this alternative financing model should not be condemned or discriminated against on the reason of religious bigotry because the advanced and more developed banking system most especially in the western nations have exploited this mode of financing to improve their economies.

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