Developing Shariah-Compliant Products for Islamic Banking Market in Nigeria: Can Bay’u Al-Inah (Buy-Back Sale) be Experimented?

Abstract

The uniqueness of Islamic banking system is in the shariah-compliant products designed to serve the market. Among the products, is the controversial bay’u al-‘inah whose acceptability remains a subject of debate among shariah experts. As Islamic banking market is still evolving in Nigeria, it becomes imperative to analyze the potentials of bay’u al-inah’s adoption. This study therefore examined bay’u al-inah product with the objective of establishing whether the product could be adopted to improve market share of Islamic banks. Data were collected with a structured questionnaire which was used to obtain data from customers of Jaiz bank and Lotus bank in Kwara State. Six Hundred (600) copies of questionnaire were administered to respondents. Ordered Logistic Regression was conducted for the data analysis. The study found that bay’u al-inah personal financing (Coeff =0.51, p<0.05), home financing (Coeff =0.82, p<0.05), and working capital financing (Coeff =0.16, p<0.05),) have positive and significant relationship with market share which was measured with number of customers’ accounts. It was concluded based on the findings that, bay’u al-inah has great potentials for attracting more customers to Islamic banks and boosting the market share of Islamic banks in Kwara State, Nigeria. the study recommends that, subject to the assessment and approval of shariah committee of experts, bay’u al-inah be adopted by Islamic banks in Kwara State and Nigeria as whole.