A professor of Islamic law at the University of Ilorin, Abdur-Razaq Alaro, has urged young Muslims and Islamic finance practitioners to use ethical financial services to address inequality, create jobs and support vulnerable communities.
Alaro made the call while delivering the keynote address at the maiden Islamic Finance Youth Summit, organised by NEXTIF at the Ilorin Innovation Hub in Kwara State on Thursday, November 5.
Speaking on the theme, “Ethical Generation: Rethinking Finance and Innovation,” the scholar said Islamic finance should be assessed not only by its compliance with Shariah but also by its impact on society.
“Compliance is important, but we must go beyond compliance. We must ask whether what we are doing is fair, whether it benefits society and whether it addresses the economic challenges confronting our people,” he said.
The Islamic finance expert warned against an approach that focuses solely on approving financial products without considering whether they improve the lives of people, particularly the poor and vulnerable.
Islamic finance and wealth inequality
Alaro expressed concern over the concentration of wealth among a small percentage of the population, arguing that Islamic finance should provide solutions rather than reproduce existing economic inequalities.
He cited figures which, according to him, showed that less than 10 per cent of the global population controls more than 80 per cent of the world’s wealth.
He also said less than 10 per cent of Nigeria’s population owns more than 90 per cent of the country’s wealth and resources.
The scholar referred to the bailout of Nigerian banks between 2009 and 2010, which he said involved about ₦5.5 trillion, compared with the country’s 2010 budget of approximately ₦4.6 trillion.
He questioned the fairness of financial arrangements in which the wider population bears the consequences of decisions made by a relatively small group.
Alaro called on Islamic financial institutions to promote equitable wealth distribution, responsible investment and access to financing for people excluded from formal financial systems.
Shariah objectives should guide financial decisions
The professor urged practitioners to place the higher objectives of Shariah, known as Maqasid al-Shariah, at the centre of financial decision-making.
He explained that these objectives include the protection of religion, life, intellect, family and property.
Citing Qur’an 16:90, which calls for justice, excellence and generosity while prohibiting wrongdoing, Alaro said fairness should remain central to economic transactions.
He cautioned against reducing Islamic finance to technical approval of contracts, urging scholars and practitioners to consider the broader consequences of their investment decisions.
The scholar also questioned whether an investment could be considered ethical simply because its financial structure was Shariah-compliant, even when the business being funded contradicted Islamic ethical principles.
Islamic finance should support productive sectors
Alaro said Islamic finance should contribute directly to economic development by supporting small and medium-sized enterprises, affordable housing, education, healthcare and agriculture.
He called for increased access to financing for farmers, women, young graduates and entrepreneurs with viable business ideas but limited capital.
The scholar urged Islamic financial institutions to move beyond prioritising shareholders’ interests and recognise their wider responsibility to society.
He said customers and communities should be regarded as stakeholders in economic development rather than merely sources of profit.
Alaro also encouraged young Muslims to use technology to develop ethical financial solutions, identifying opportunities in fintech, digital bookkeeping, blockchain, smart contracts and crowdfunding.
He highlighted the potential of Islamic social finance instruments, including zakat, waqf, sadaqah and qard al-hasan, to support vulnerable communities and finance productive activities.
Alaro calls for greater use of profit-sharing finance
The Islamic law professor expressed concern over the dominance of Murabaha, a cost-plus sale arrangement, in the financing portfolios of some Islamic financial institutions.
He said his research found that Murabaha accounted for between 60 and 100 per cent of financing in some banks.
Alaro explained that the early vision of Islamic banking placed considerable emphasis on profit-and-loss sharing arrangements such as Mudarabah and Musharakah, which encourage partnerships and shared business risks.
He clarified that his criticism was not a rejection of Murabaha but a call for the industry to rebalance its financing model by giving greater attention to participatory arrangements that support entrepreneurship and productive investment.
The scholar also called for closer collaboration between Shariah scholars and Islamic finance practitioners, saying both groups must understand the realities of the industry and the requirements of Islamic jurisprudence.
He urged regulators, policymakers, financial institutions and young innovators to develop ethical financial solutions that respond to Nigeria’s economic challenges.
Alaro encouraged young Muslims to combine knowledge, innovation and ethical responsibility to build a financial system that serves humanity.
