Islamic banking: CBN clarifies contentious issues   

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Nigeria’s Apex bank allays fears on Islamic Banking

Islamic banking: CBN clarifies contentious issues   
Hauwa Noroh Ali, Abuja

The Governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi has advised critics of the proposed Islamic banking to go to court to seek the interpretation of the law, which empowers the CBN to establish such a bank.

Mr Sanusi was speaking in Abuja, at a two-day International Conference on Non-Interest Islamic Banking organized by the central bank and the Islamic Development Bank.

The Apex Bank’s chief stated that it was only the court that can determine whether the proposed bank was against the constitution of Nigeria. He noted that the CBN would abide by the court’s judgment.

“The bank will stop the establishment of non-interest Islamic banking if the court says it is illegal.

“we don’t think the court will say so because we know we are acting within the realm of the law but it is only the court of law that can make a pronouncement on the legality of anything.  So if anybody says it is illegal, then he should go to the court of law and let the law pronounce the legality or illegality of it,’’ he said.

Constitution backing

He said the issue of Islamic Banking has a root in the constitution and one has to amend the constitution to expunge that aspect that empowers the CBN to establish a non-interest bank.

He further stressed that Islamic banking has nothing to do with promoting religion, but was simply another financial product designed to diversify and broaden the scope of banking services available to customers.

The concept of Islamic banking

"The whole concept of Islamic Banking System was introduced in the country through Banks and other Financial Institution act of 1991 that allows the operations of Non Interest Banking services in Nigeria," he said.

He further stressed the fact that the apex bank was not in any way promoting or establishing an Islamic bank in Nigeria, contrary to speculations.

“The Central bank is simply licensing and regulating an institution that is allowed to exist under the law and is not allowed to deny anyone the opportunity to be a stakeholder. It does not deny anyone the right to set up his own bank. There is absolutely no discrimination. We have to continue making that point, hopefully, people will get to understand with time,’’ he said.

Criticisms

The initiative has also met with religious controversy. The prominent Anglican Bishop of Enugu, Reverend Emmanuel Chukwuma stated that a religious bank “would pose a serious threat to the unity of the country” and that his church would opposed the move due to its “religious connotations.”

The remarks were swiftly rebuffed by Muslim Rights Concern (MURIC), a non-governmental organisation.

 “At present, Muslims are forced to patronise financial institutions which operate riba [charging interest on loans] and which compel Muslims to act against their faith. This is a clear indication of a lack of religious freedom,” the group’s director, Is-haq Akintola, said in a statement

 Sanusi said that the non-interest banking had been practiced in about 435 institutions and in about 75 countries in the world.

He said that with the revised guidelines in place, Nigeria was set to join the league of other countries to benefit from the non-interest banking.
To ensure effective operations, he said, Nigeria had joined the Islamic Financial Service Board and ensured collaboration between Securities and Exchange Commission and Nigeria Deposit Insurance Corporation.

Earlier, Sanusi said he was looking at Islamic finance as a way of diversifying the country's financial system and was planning to issue the first sovereign sukuk within the next 18 month.

He added that the apex bank had also signed a Memorandum of Understanding with Bank of Malaysia on issues of “regulator cooperation and collaboration.''

 In his words, “the ethno-religious diversity of Nigeria called for mass awareness, as misconception of the concept might jeopardise the process.

“For us in the CBN, we will like this conversation at the conference not to be a conversation between Muslim and Christians because Islamic banking is a universal product.

“We will like it to be conversation on finance, economics; it is about deepening the financial system and enhancing financial system stability and financial access,’’ he said.

Business prepositions

The Central Bank governor also confirmed that the Nigerian unit of South African lender Standard Bank had won approval to set up an Islamic banking arm. He said Stanbic IBTC Bank had six months to comply with the approval terms. , noting that  Jaiz Bank International had six months to comply with terms laid out by the CBN to get a final licence

Mr Kinsley Moghalu, CBN Deputy Governor, Financial System Stability, said that there was no need to express fear about the introduction of the non-interest Islamic banking in the country.

He said that the operation was based on pure business preposition and universal accessibility for all purpose irrespective of religion, culture, race or gender.

“As a value proposition, it is faith, gender and religious blind. Non- interest Islamic banking is offered in western and financial centres such as London, Japan and Singapore,’’ he said.

He noted that global institutions such as Citi Bank and Standard Chartered Bank were among the foremost providers of the non-interest banking in the world.

Moghalu explained that the establishment of the non-interest banking was in line with the financial system strategy of the Federal Government aimed at strengthening the sector.
He added that establishing the non–interest banking was an opportunity for artisans who could not fit into the conventional banking to benefit and contribute to the growth of the sector.

Moghalu gave an assurance that the apex bank would comply strictly with guidelines and proffer a level playing ground for smooth operation of the bank.

 Also speaking, Mr Danladi Kifasi, the Permanent Secretary, Federal Ministry of Finance, said that non-interest banking was all about profit and loss and ability to develop trust.

He said that it was not a religious product and would be another potential avenue for employment creation in the country

Expected impact  

Islamic banking has the potential to boost Nigeria's economy and provide financial solutions for the country’s 60 million Muslims and it also has a minimum of one trillion dollars global industry operating in more than 75 countries, with nations like Malaysia, Bahrain and Turkey benefitting from the system.

Even countries without significant Muslim populations, such as the UK and South Africa, are successfully involved in the banking system.

Williams