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LAGOS –  While conventional financial systems often fall short in addressing the multifaceted risks faced by individuals and communities, Islamic finance offers a unique perspective rooted in ethical principles and social responsibility.

According to experts, Islamic finance is not merely a set of financial products; it is a comprehensive system promoting fairness, transparency, and risk-sharing.

It encourages investors to consider the social, ethical, and environmental implications of their financial decisions.

They noted that this holistic approach is particularly relevant today, where the consequences of financing extend beyond mere profit and loss as the global community continues to navigate an era marked by economic volatility, environmental challenges, and social upheavals, the need for innovative solutions is paramount.

According to Reports, Shariah-compliant financial services, Islamic finance in Nigeria is growing rapidly and the sector accounts for approximately 2-3percent of Nigeria’s total financial market, valued at $3.8 billion.

Sukuk dominates the market at 59.3percent, followed by non-interest banks at 39.8percent, and Islamic funds and Takaful at 0.9percent.

 The industry comprises of four non-interest finance banks, five Takaful companies, 15 microfinance institutions, and 10 non-bank financial institutions.

Central to Islamic finance is the concept of Takaful, or Islamic insurance which is on the upward trend and rapidly growing.

This is driven by the fast space acceptances by the general public, non-Islamic faithful and those in the faith who have found Takaful a sure financial tool for their budget layout unlike conventional insurance, which often involves risk transfer and interest, Takaful is a Shariah-compliant form of insurance based on mutual cooperation and shared responsibility.

Mr. Segun Omosehin, the Commissioner for Insurance and Chief Executive Officer at the National Insurance Commission (NAICOM) described takaful as a common fund, which is used to support those in need, fostering a sense of community and solidarity.

He explained that in a world where climate change, health crises, and economic instability threaten livelihoods, Takaful offers a resilient framework that provides not only financial protection but also a safety net that empowers individuals and communities to recover from adversities.

 “By promoting risk-sharing and collective responsibility, Takaful helps mitigate the impact of unforeseen events, enabling families and businesses to bounce back more effectively.

“The principles of Islamic finance and Takaful are especially pertinent in enhancing resilience through risk mitigation, social justice and sustainable development,” he said, adding, he emphasized the three key ways with which non-interest based financial products contribute to risk mitigation mechanism. These are Risk mitigation; Social Justice and the Sustainable Development.

Explaining further he said: “Islamic finance encourages diversification and ethical investment, reducing exposure to high-risk ventures. Takaful, specifically, spreads risks among participants, making it easier for individuals to access necessary financial support during crises.

Social Justice emphasizes fairness and equity in Islamic finance ensuring that even the most vulnerable members of society are protected. Takaful also promotes inclusivity, allowing individuals from various socioeconomic backgrounds to participate in risk-sharing, thereby fostering social cohesion.

Sustainable Development: Islamic finance aligns closely with the principles of Sustainable Development Goals. By prioritising investment in ethical and socially responsible enterprises, it contributes to economic stability while addressing environmental and social challenges.

The CFI maintained that the NAICOM has been instrumental in promoting the growth of the Takaful industry in Nigeria through several initiatives.