Reconceptualising Smart Contracts as Sharīah and Legally Compliant Self-Help for Credit Risk Management in Nigerian Islamic Financial Institutions (International Journal of Management Finance and Accounting)

Summary

• Islamic Fintech volume within OIC countries was 49 billion dollars in 2020, representing 0.7% of total market share.p.2
• Islamic Fintech volume within OIC countries is projected to reach 128 billion dollars by 2025.p.2
• Islamic Fintech is expected to grow at a 21% CAGR compared to a 15% growth rate projected for conventional Fintech.p.2
• In 1993, insolvent banks accounted for about 20 per cent of banking system assets and about 22 per cent of deposits in Nigeria.p.12
• In 1995, almost half of Nigerian banks reported being in financial distress, resulting in the liquidation of about 25 banks.p.12
• A credit facility is deemed non-performing by the Central Bank of Nigeria when principal or interest is due and unpaid for 90 days or more.p.12

Key insights

1. Properly structured smart contracts align with Sharīʿah principles of transparency, certainty, proportionality, and necessity to operate as valid self-help mechanisms.p.1
2. Section 4 of the Statute of Frauds 1677 requires contracts to be in writing and signed by the parties, creating statutory friction for smart contract execution in Nigeria.p.3
3. Sections 127, 128, and 129 of the Federal Competition and Consumer Protection Act 2018 invalidate unfair, unreasonable, or excessively one-sided contract terms in Nigeria.p.5
4. Islamic jurisprudence permits self-defence and self-help to protect property and rights, provided action is limited to what is strictly necessary.p.8
5. Admissibility of smart contracts as computer-generated evidence in Nigerian courts requires satisfying the reliability conditions of Section 84(2) of the Evidence Act 2011.p.11
6. Islamic financial institutions cannot earn interest on loans and must instead use risk-sharing equity models or Sharīʿah-compliant trade and leasing structures.p.13