HERE COMES ISLAMIC BANKING

A pivotal part of the banking reform by the CBN is the planned introduction of Islamic Banking. Speaking to Senators about this during his screening exercise the CBN Governor Lamido Sanusi said, “the services (Islamic banking services), would be available to Muslims and non-Muslims. It is not a religion; it is a product available to the public. By definition, the CBN described the Islamic bank as “a non-interest bank which transacts banking business, engages 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”. The CBN further highlighted that the system allows for a feasibility study or investigation to be carried out by the lending banks on the proposed business before granting of any loan in other to assess the feasibility and viability of such a venture or project . The survey will help the bank to envisage the prospects of the borrower to repay the loan within the maturity period of the loan and to ensure that all transactions are carried out within the tenets of the sharia laws.

 Ever since, this reform agenda has come under heat. In reaction to speculations that the Islamic banking is Sanusi's own ill-intentioned project, the CBN governor has stated clearly that the idea and approval of the Islamic Banking system was a heritage from his predecessor, Prof. Soludo. Speaking through Mohammed Abdullahi, Head, CBN Corporate Affairs, the governor said: "this policy has been on for about three years and has been approved in principle for some time now. I can recall that Jaiz International Bank Plc has been given approval in principle to operate as an Islamic Bank. All that the Central Bank is waiting for them to do is to mobilise their capital base of 25 billion required for operations in the Nigerian banking system. Approval-in-Principle has already been given during Soludo's time". BankPHB was also given approval in principle to operate Islamic banking started operation in this direction. Introducing this product, Bank PHB explained that "this product is designed for Muslim faithful desiring banking services without compromising their religious beliefs”

The name, 'Islamic Banking' sends shivers across the country especially among non-Muslims who fear that it is a hoax to get Nigeria fully Islamized. A source said, “they should find a more generic name for it as the mere mention of that word 'Islamic' brings a sudden fear and psychological trauma on our minds. I still think this is, and has always been a carefully thought out agenda by Sanusi and those who put him there”. ” How are we sure that this so-called islamic bank will not be used to fund jihad and terrorism in Nigeria?,  another asked. This is coming at the heels of the Central Bank Governor's avowed resolve to grow and nurture full scale Islamic Banking in the Nigerian banking sector as a hedge against future global economic crisis and as an alternative to supplement the regular or conventional banking system in Nigeria.

In other to dispel the fears of those who are scared of the nomenclature, 'Islamic bank' the Central Bank issued a directive and a guideline recently to prospective applicants for the Islamic bank license. It was signed by D.A.N. Eke, the Acting  Director of Banking Supervision. On the name, the guideline reads thus, “in line with the provisions of Section 39 (1) of BOFIA 1991 (as amended), banks offering non-interest banking products and services shall not include the words “Islamic” as part of their registered or licensed name. They shall however, be recognized by a uniform logo to be designed and approved by the CBN. The CBN shall require all the banks' signages and promotional materials to carry the logo to facilitate recognition by consumers. It also directed that non-interest banks should not perform transactions that involve interest, uncertainty or ambiguity relating to the subject matter, terms or conditions, gambling, speculation, unjust enrichment or exploitation/unfair trade practices. In other words, the banks will be known and operate as a non-interest bank. Furthermore, the directive stipulated that “in view of the ethical character of their business, all non-interest banks are required to screen their promoters, shareholders, customers, counterparties, transactions, products and activities against the proceeds of crime, corruption, terrorist financing and other illicit activities using legal and moral filters”. This guideline guarantees anti-money laundering and combating of the financing of terrorism.

Some of the basic principles that make Islamic banking attractive as explained by Muath Mubarak who is presently working for Brawa Bank (a newest full-fledged Islamic Bank in Qatar) include: The principle involves a contract under which the investor brings financing to the table and the entrepreneur brings expertise, effort, and in the case of Islamic venture capital, a business plan. Collectively, the parties share the proportionate profit from the results of the enterprise as per their pre-arranged agreement. The entrepreneur cannot be placed at risk of losing money since he has contributed only expertise. If the business venture fails, then the most the entrepreneur could lose is the investment he has already made in the business and the time and effort he had put into the venture. In other words no one can come after the entrepreneur for cash compensation.

http://nigerianorientnews.com/Business.html