Managing Director of Lotus Capital Limited Mrs Hajara Adeola is the Managing Director of Lotus Capital Limited, a Nigerian pioneer in Shari'ah compliant Asset Management, Private Wealth Management Advisory Services and Financial Advisory Services. She comes to Lotus Capital from UBS Warburg where she was a Director heading their London Islamic Finance Desk. Her responsibilities included structuring and trading Islamic Finance investment instruments for European private clients and multi- currency money market instruments for institutional clients (UK private banks). She was also responsible for structuring innovative Islamic Finance instruments to meet evolving client requirements and liaising with the Shari'ah consultants for approval. Prior to joining UBS, she was a Convertible Bond Research Analyst at BNP Paribas, London where her primary responsibility was to analyze, write and publish daily and quarterly research on European convertible bonds. This research was published on Bloomberg and distributed to BNP Paribas' worldwide institutional convertible client base daily. In addition, she structured and priced primary convertible bond issues for corporate clients and gained invaluable experience in the over the counter structured finance field. Mrs. Hajara Adeola began her career as a consultant at Andersen Consulting (now Accenture). From there she joined ARM Investment Managers as a pioneer staff and rose to Vice-President and Head of the Research and Financial Advisory Units. Her responsibilities included equity research, trading and investment management of global equity portfolios and financial advisory assignments (feasibility reports, business plans, project management and fund raising). In all, she has over 15 years of international experience in research and analysis, investment management and corporate finance.

1. Financial Inclusion and the role of Islamic Finance
By
Hajara Adeola
Lotus Capital Limited

2. 2
Who is Lotus Capital Limited
 Lotus Capital Limited was incorporated in June 2004 and is duly registered with the
Nigerian Securities & Exchange Commission (SEC)
 Lotus Capital is the pioneer ethical investment management company in Nigeria with
expertise spanning across Financial Advisory Services, Issuing House Services, Asset
Management, Private Wealth Management
 Lotus Capital was the lead Issuing House to the first sub-sovereign Islamic Bond (Sukuk)
offering in Sub-Saharan Africa
 Lotus Capital is the first Nigerian company to launch an index in partnership with the
Nigerian Stock Exchange (NSE Lotus Islamic Index)
 Lotus Capital has the first Shar’iah compliant mutual fund listed on the floor
(memorandum listing) of the Nigerian Stock Exchange

3. 3
The Context
 Poverty (also called penury) is deprivation of common necessities that determine the
quality of life, including food, clothing, shelter and safe drinking water, and may also
include the deprivation of opportunities to learn, to obtain better employment to escape
poverty, and/or to enjoy the respect of fellow citizens.
 According to Mollie Orshansky who developed the poverty measurements used by the U.S.
government, "to be poor is to be deprived of those goods and services and pleasures which
others around us take for granted."[1]

4. 4
Introduction
 Financial inclusion is a state in which all people have access to a suite of quality financial
services, provided at affordable prices, in a convenient manner, and with dignity for the
clients (Centre for Financial Inclusion)
 89% of people in high-income countries have an account at a financial institution
compared to 24% in low-income countries (Centre for Financial Inclusion)
 11% of people in low-income countries save money at a financial institution (Centre for Financial
Inclusion)
 23% of adults in Africa have accounts with a formal financial service while 24% of Adults
in Sub-Sahara Africa have accounts with formal financial institution (Demirguc-Kunt and Klapper,
2012)
 Islamic Finance is one of the most rapidly growing segments of the global financial system
with global assets of US1.7triliion in 2013 growing at 17.6% over the last 4 years (World Islamic
Banking Competitiveness Report 2013–14,EY)
 Islamic Finance is a critical component of the financial inclusion strategy for Africa

5. 5
Financial Inclusion In Nigeria
Adult
Population
Profile
71% Rural
51.8% Male
48.2%
Female
64% Has a
mobile
phone
27.1%
Farming
50% Under
33 years
26.5%
Have
no education
 The total adult population is 87.9
million
 Nigeria has a large rural (71%)
population
 50% of the adult population is under 33
years
 35.5% of rural adults are farmers
 Mobile phone ownership is 84.9% in
urban areas and 55.6% in rural areas
 8.1% of adults have some form of
tertiary education
Source: EFInA Access to Financial Services in Nigeria 2012 survey
Demographic Profile

6. 6
Financial Inclusion In Nigeria
Nigeria’s rate of financial exclusion is currently at 39.7% (EFIna, 2012)
Formally banked
All adults who have access to
or use a deposit money bank
in addition to having/using a
traditional banking product
Formal other
All adults who have access to
or use other formal institutions
and financial products not
supplied by deposit money
banks
Informal only
All adults who do not have any
banked or formal other products,
but have access to or use only
informal services and products
Financially Excluded
Adults without formal or
informal financial products
Source: EFInA Access to Financial Services in Nigeria 2012 survey

7. 7
Involuntary & Voluntary Financial Exclusion
Financial exclusion can be caused by voluntary and involuntary factors
• Involuntary exclusion is due to supply side constraints like lack of collateral and high
cost of operations.
• Voluntary exclusion is due to religious reasons. Most Muslims do not opt for interest
based modes of saving and financing. This is where Islamic finance proffers a financial
inclusion solution

8. 8
Involuntary Factors– High Cost of Operations & Crowding Out
• Commercial banks look to serve bigger clients by offering large credit lines on long term
basis to reduce cost per fresh loan
• At the bottom of the pyramid, the fixed cost of administering a small loan is usually
high.
• Government crowds out private sector borrowers and finances its deficit at high
domestic interest rates.
• Domestic interest rates have to be kept higher by the central bank to control inflation
fueled by indirect taxes, currency depreciation and monetization of public debt.
• When better yields are offered to commercial banks on the purchase of sovereign
securities, the high-risk high-return based consumer or microfinance remains much less
of an attraction.

9. 9
Financial Inclusion – A look at the Strategy In Nigeria
Nigeria, through her Maya Declaration is committed to reduce her rate of financial exclusion from
39.7 per cent in 2012 to 20.0 per cent of the population by 2020 through the implementation of
seven key interventions:
 Simplified KYC Framework
 Agent Banking Regulatory Framework
 National Financial Literacy Framework
 Consumer Protection Framework
 Mobile-Payments and “Cash-less” Policy Initiative
 Establishing Linkages between government, DFIs, DMBs and MFBs / MFIs
 Introduction of Credit Enhancement Schemes and Programme – MSMEDF, NIRSAL and EDCs
Source: Central Bank of Nigeria (CBN)

10. 10
Financial Inclusion Strategy In Nigeria
Nigeria Financial Inclusion Target.
Source: National Financial Inclusion Strategy, CBN

11. 11
Islamic Finance- A critical strategy for Financial Inclusion
Nigeria Financial Inclusion Target
“According to statistics, a total of 39.2 million adult Nigerians (46.3% of the adult
population) were financially excluded in 2010. Further analysis revealed that 54.4% of
the excluded population was women, 73.8% were younger than 45 years, 34.0% had
no formal education, and 80.4% resided in rural areas.”
“Northern Nigeria is particularly disadvantaged, with 68% of adults excluded in both
the North-East and North-West regions.
Formal inclusion rates range from 49% in the South-West region to only 19% in the
North-West region. The “informally included”, primarily live in the North-Central
region, where 23% of adults have access to only informal services.”
Source: National Financial Inclusion Strategy, CBN

12. 12
Why Islamic finance?
• The answer to voluntary exclusion
• Islamic Banking & Finance is an alternative asset class and not a replacement of
the conventional system
• To serve ethically-inclined people, clients seeking alternatives to the
conventional system as well as the un-banked population.
• Islamic banks are created to run parallel to conventional banks as practiced in
the United kingdom, South Africa, Kenya, Gambia, Malaysia e.t.c.
• It is about financial inclusion NOT exclusion

13. 13
Shared values of the Abrahamic faiths (Christianity, Islam, Judaism)
• Deutoronomy (5th book of the Torah)23:19:”Thou shalt not lend upon usury to
thy brother; usury of money, usury of victuals, usury of anything that is lent
upon usury.”
• Psalm 15:1,2,5:”Lord, who shall abide in thy tabernacle? Who shall dwell in
thy holy hill? He that walketh uprightly and worketh righteousness, and
speaketh the truth in his heart. He that putteth not out his money to usury, nor
taketh reward against the innocent. He that doeth these things shall never be
moved.”
• Quran 2: 278-279: “O you who believe: fear Allah and forgo what remains of
usury (riba) if you are believers. If you will not, then know of a certain
declaration of war (against you ) from Allah and his Messenger. But if you turn
back, you shall have your capital sums: Deal not unjustly and you shall not be
dealt with unjustly.”

14. 14
Islamic Finance Principle
Concept & Principle
Ethical screen (alcohol, gambling,
porn, pork, interest, tobacco)
Sharing Sale Lease

15. 15
Islamic Finance in Nigeria
 Islamic Finance in Nigeria has grown substantially over the last 4 years in terms of awareness
and establishment of an appropriate policy framework from regulators.
 CBN has licenced 2 commercial banks to operate a non-interest banking window and a full
fledged non-interest bank
 The first sub-sovereign Islamic bond (N11.4billion Osun Sukuk) in Sub-saharan Africa was
issued by the State Government of Osun arranged by Lotus Capital Limited and was honoured
with the award of “Islamic Finance deal of the Year 2013” by IFN in 2014
 Guidelines for the issuance of Takaful (Islamic Insurance) has been issued and a few insurance
operators offer the service as a window
 Lotus Capital Limited in partnership with the Nigeria Stock Exchange (NSE) established the first
Islamic index (NSE Lotus Islamic Index) in sub-saharan Africa in 2012.

16. 16
Conclusion
 World Bank Statistics 2013 indicate that 2.5 billion people or half of the world’s adult
population are unbanked. The target is universal financial access to all working age adult by
2020
 ‘’whether you are a public sector financial regulator or a private sector bank, it is in your
interest to get everyone access to financial services. This is good for the world and will help us
end poverty.” World Bank group Press release 2013
 It has been observed that religion and educational background have hindered certain segment in
our society from being financially included. Islamic finance is assumed to be the most preferred
option in modern times to accommodate these segments
 Islamic finance promotes broader economic participation the proceeds of which contribute to
tax revenue and create additional liquidity for government to deliver socio economic
infrastructure which is paramount to sustainable development
 Islamic financial inclusion structures create additional liquidity for asset backed transactions
which ensures a more stable and efficient use of asset allocation

17. 17
Lotus Capital Ltd
1b Udi Street
Osborne Foreshore Estate
Osborne Road, Ikoyi, Lagos
Nigeria
T1: +234-1-271 3280-
2
F: +234-1-271 3284
M: +234-
Kano Office:
1st floor, UBN Property
Company Limited,
37 Niger Street,
Kano
T1: +234-1-064 890546
T2: +234 -0702 805
9001
Abuja Office:
Lotus Capital Ltd
Ground Floor
2 Malanje Street
Wuse Zone 4, Abuja
T1: +234-9-875933306
www.lotuscapitallimited.co
m
THANK YOU