Minimizing Unemployment in Nigeria through Mudharaba Finance: a proposed framework

Abstract

Mudharaba is an asset-backed financing tool used in Islamic finance to bridge financial gap in the society such as funding agricultural output and farm credit, infrastructural projects and investments. It is proposed in this study as an effective Islamic means of creating jobs and fixing youth’s unemployment challenges in Nigeria in addition to the impact of covid-19 pandemic which has left more people jobless in the country. The primary aim of mudharaba financing is its equity model in profit and loss sharing whereby the capital provider and the user equally share risks that occur in business without negligence from fund user’s end. Therefore, the scope of this paper examines the concepts of mudharaba financing, enumerates its necessity, merits and applicability for poverty reduction, employment generation, survival and sustainability means for Nigerian populace and particularly youths who occupy more than half of the population with skills on petty trade and agricultural practice. The study employs qualitative analysis from online articles, library materials and reports. Data was collected from an interview conducted on three basic elements of Mudharaba. The findings revealed that financing via mudharaba is based on justice, equity and fairness, benefits and professionalism, and guarantee. It showed that unemployment will be minimized through this technique with the collaboration of the Federal government with its Central Bank (CBN), initiating schemes and policies that would ease access to capital and as a channel of empowerment from Non-Interest Financial Institutions (NIFIs) and conventional windows offering Sharia complaints services in the Nigerian banking sector.