Islamic banking and finance (IBF) is about to become part of the banking and finance landscape of Nigeria. Last week, the executive directors of the Central Bank of Nigeria (CBN) returned from a one-week under-study the Negara Bank of Malaysia, purportedly a model of successful IBF. The CBN Governor, Sanusi Lamido Sanusi himself has made frequent trips to the same bank over the past ten months in search of a supervisory framework for Nigeria’s microfinance banks and IBF.

Sadly, the debate about the impending policy has been dominated by a privileged minority of Muslims while most non-Muslims either feign ignorance or simply see an ‘Islamic agenda.’ The fact is that Sanusi’s predecessor, Charles Soludo approved—in principle—the establishment of IBF in Nigeria in March 2009.

However, during his Senate screening in 2009, Sanusi warned about charlatans offering IBF while actually running conventional banking, and admitted that ‘If things are set in place, I would be in support.’IBF is recognised in the amended Banks and Other Financial Institutions Act 1991. Some conventional Nigerian banks (e.g., Fin Bank, Bank PHB) and some microfinance banks (e.g., Integrated Microfinance Bank—since mid-2008) already offer IBF products. The first full-fledged Islamic bank approved by the CBN is Jaiz International Bank Plc, but it has yet to raise a capital base of ¦ 25 billion required for operations in the Nigerian banking system.

Islamic banking is a non-interest banking business in trading, investments and commercial activities, as well as the provision of financial products and services, in accordance with the principles and rules of Islamic commercial jurisprudence. Transactions and contracts under this type of banking are haram if they involve ‘interest; uncertainty or ambiguity relating to the subject matter, terms or conditions; gambling; speculation; unjust enrichment; or exploitation/unfair trade practices.’ As ‘a commercial scheme with conscientious approach,’ customers contribute funds and both the bank and the customer share in the profits from the product.

Globally, there are over 200 IBF institutions, with total assets of US$200 billion. They manage over $250 billion of assets, and according to the accounting firm KPMG, reached a US$1 trillion industry by 2009. IBF services are offered by reputable and leading Western banks, namely HSBC, Lloyds TSB and Citibank, and South Africa’s ABSA Bank whose products reportedly attract non-Muslim customers. Yet, a 50-per cent Muslim country like Nigeria is only now seriously considering IBF when leading Western countries such as the United States and Great Britain have had them for over two decades.

Islamic banking could not have come at a better time than now, given the lingering global financial meltdown caused by a usurious conventional banking system. The corruption and plunder in Nigerian banks before 2009 show that Nigeria’s conventional and microfinance banks both suffer from severe shortage of conscience and prudent management. Despite CBN’s interventions, the sector—particularly the microfinance banks—still runs the risk of collapse soon if the operators did not change their strategy.While prospects for IBF are theoretically promising, Nigeria is not Malaysia, Pakistan, or Saudi Arabia which are Muslim majority countries. Nigerians deserve to see evidence of ‘yearning’ and those ‘quite evident enormous opportunities’ of IBF in Nigeria claimed by the CBN. If anything, the on-going re-traditionalisation of Islam in Nigeria actually compounds the frighteningly poor understanding of IBF principles among current and potential clients. Add to this the paucity of adequately trained bank employees you begin to appreciate the need for modesty in our speculations.Islamic banks in Nigeria face the ethical dilemma of many middle class Muslims—just like non-Muslims—wanting the latest model cars, beautiful homes, private education, which some may pay for through bank loans that abide by Islamic principles.

This, however, raises a looming conflict between the fundamental tenets of Islam that does not promote materialism, and the debt incurred by the rapid progress in IBF as envisaged by CBN. Shouldn’t we anticipate fatwas against an obvious haram if sharia-compliant banks fail to discourage prospective Muslim borrowers from accumulating unnecessary debt?The Islamic market is limited to two main products, murabaha (cost-plus financing) and equities. Yet, money cannot be borrowed to repay another bank or for consumption purposes, while overdraft facilities do not exist. Does CBN have an option for a working class Muslim needing a fridge or stove other than partaking in interest-based transaction?CBN’s homogenising narrative ignores the elementary fact that Nigerian Muslims have always been divided along social, economic, and ethnic lines.

The uneven distribution of wealth in Nigeria is more skewed among Muslims, and more scandalous in the deep Muslim north. Sadly, a privileged minority is dominating the debate about IBF while large numbers of Muslims across the country remain ‘sinners’ because they rely on conventional financial mechanisms. Those who suggest that individuals disqualified by the onerous requirements of IBF obtain interest-free loans from friends or relatives should note that this is not an option for poor people with poor friends or relatives.

Next week, lack of a secondary market, shar’ia-auditing or vetting skill shortage, and comparisons with the prostituted shar’ia enforcement in Nigeria will be explored to assess the possibility of unalloyed and untainted shar’ia-compliant IBF system that meets the strictest of Islamic interpretations for the shar’ia in a gangster-capitalist economy like Nigeria.

https://www.nairaland.com/nigeria/board-44.0.html

what are your thoughts on sharia banking .

no religious undertones please.

They give interest Free Loans; I guess.

For that reason, I am eagerly awaiting it's launch, though i am not a muslim

kawazaki:

They give interest Free Loans; I guess.

For that reason, I am eagerly awaiting it's launch, though i am not a muslim

But u have to be a Muslim to enjoy it, so dont wait too long

If the banking system has no strings attached, it could be a good idea for some people.

its too altruistic to be successful in the modern economy.
its a nice development if they cater to all customers i dont think it's just muslims that get the services.

Can someone like Michael Paul be offered a job in this kind of bank?