Innovation Hubs, Key to Attracting Islamic Venture Capital Investments in Nigeria

Posted on June 30, 2021 by Design in Design Innovation | 0 Comments

Friday, June 25, 2021 / 11:00 AM /
Bukola Akinyele- Yisau for WebTV / Header Image Credit: EcoGraphics

The establishment of innovation hubs that
are tailored to developing Sharia-Compliant Start-ups will attract Islamic
Venture Capital (VC) firms into Nigeria. Mr. Habeeb Gbenle, Fund Accountant and
Sharia Compliance Officer, Capital Trust stated this and provided insights
into the “Prospects for the Growth of Islamic
Venture Capital in Nigeria” during the Islamic Finance Weekly programme.

According to Mr. Gbenle, this will serve as a platform through which
individuals will share ideas and will encourage Islamic VCs and investors to
the Nigerian non-interest market.

The Islamic finance expert believed non-interest financial institutions
can develop investment models to attract VC investments, and this will be
effective through collaborations between non-interest banks and private equity
companies. This partnership according to him will lead to the establishment of
innovation labs to encourage the activities of Islamic fintech start-ups.

Speaking on the reason why there are no IVCs (Islamic Venture Capital
firms) in Africa that can support Sharia Compliant Startups, he said majority
of the funding to tech start-ups are from foreign investors.

Giving further perspective, he said statistics showed about 1% funding
comes from local investors and this was the reason Africa does not have any IVC
at the moment. He cited the case of Nigerian Venture Capital firms whose
funding are not domiciled in the country but with foreign investors. He also
observed that there are a lot of foreign VC firms that are Africa focused.

He called for support from the government through the Nigeria Sovereign Investment
Authority (NSIA)
which can play a vital role in leading investment rounds for start-ups in the
country, partnering with various local Venture Capital firms focused on the
growth of Nigerian start-ups.

Habeeb Gbenle highlighted
the following as sectors that Islamic Venture Capital firms can support such as
the finance industry which covers Islamic Banking, Fintech, Insurtech, and
Mortgage where there is low investment penetration.

Other sectors include
lifestyle, education and agriculture which are drivers of economic activities
in the nation.

Providing further details of the IVC operations, he said the most used
instrument is the Wakala structure, where the Limited Partners
appoint the Fund manager to manage the investment on its behalf for a return of
management.

In the structure of the relationship between the IVC firms and start-ups
businesses use Mudarabah tool, where the VC provide the funding
and the start-ups getting the investment serves as Mudarib. Islamic
VC is another alternative through which businesses can be financed.

Watch the Islamic Finance Weekly Programme for June 25, 2021 HERE

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