Central Bank Catalogues Benefits Of Islamic Banking

Central Bank Catalogues Benefits Of Islamic Banking
Hauwa Noroh Ali, Bauchi.

The Special Adviser to the Central Bank on Non-Interest Banking, Dr. Bashir Umar says the introduction of non-interest (Islamic) banking in Nigeria would herald the entry of new markets and institutional players.

He said operators such as the Islamic Money Market , Islamic Assets Management Companies and Islamic Insurance would support the financial system and thus enhance the financial market .

Dr. Umar said that so much interest had been generated in Islamic finance on a global scale, because of its phenomenal growth within a relative short span of time, most especially at the aftermath of the recent financial crisis.

He said that on a regional plane, several countries were struggling to become the hub of Islamic finance on the African continent, aspiring to be pioneers in the field.

A matter of time entry 

The Special Adviser said that in Nigeria, market operators banks, insurance and asset entities are exploring this alternative financial model and its potentials with most regulators gearing up to the role they would have to play in regulating and supervising this innovative financial service industry whose entry into the Nigerian economic arena is only a matter of time .

Dr. Umar said that because of its asset-backed financing nature, non-interest financial services will have the effect of availing funds only to the production and real investment activities based on its practical record of success in I ndonesia , Bangladesh and Pakistan .

He said that other areas of potential impact are: enhanced inflows of foreign direct investment and possible strategic linkages with international financial institutions as well as a potential increase in the banking sectors contribution to national GDP.

Challenges to its debut in Nigeria  

The Special Adviser said that some of the challenges that have slowed down the introduction of Islamic Financial system into Nigeria are: dearth of knowledge, skills and technical capacity to regulate, supervise or operate non interest banks.

He said personnel with experience in project management and Islamic jurisprudence is required for the peculiar financing and marketing activities.

He noted that the absence of Islamic insurance and capital market institutions to protect investment of non interest banks against unforeseen hazards have stunted the growth of the industry, saying the Central Bank of Nigeria as a lender of last resort, cannot provide loans for the Islamic bank because such funds are usually provided on the basis of interest.

Dr. Umar said there was a need for diversifying and implementing an interest-free framework for such assistance.

He however observed that despite the challenges, the system should not be over looked noting that from the resilient nature of Islamic finance, enormous opportunities abound with positive and far-reaching impact for the Nigerian economy.

Yinka