Nigeria Islamic Finance Shows Huge Potential

The Stock Exchange officially launches the NSE Lotus Islamic Index (NSE LII) which consists of companies whose business practices are in conformity with the principles of Shari'ah. Sunday Trust looks at the necessity of the index.

In a bid to attract Sharia/ethical investors to Nigeria's budding stock market, Islamic wealth manager Lotus Capital and the Nigerian Stock Exchange (NSE) on Monday launched a debut index of NSE-listed companies that comply with Islamic investment principles.

This is one of the many steps the exchange has taken to bring to fruition its vision of becoming the gateway to African markets.

The Islamic Equity Index known as the "NSE Lotus Islamic Index" (with the code NSE LII) consists of companies in conformity with the principles of Shari'ah. The NSE LII, which is the first index created to track the performance of Shari'ah compliant equities on the floor of the exchange will increase the breadth of the market and create an important benchmark for investments as the alternative non-interest investment space widens.

The Islamic Index can serve as a general benchmark for 'ethical' funds and can be seen as a basis for creating Mirror Funds, Index Funds, Exchange Traded Funds, Index options etc., which will broaden the range of financial instruments traded on the NSE.

The NSE Lotus Islamic index, covered 15 equities with combined market capitalisation of around N2.87 billion, excluding banks, companies with high debt or leverage and other stocks that conflict with Islamic principles.

The index is designed to encourage more investments from the Middle East and weighted towards fast moving consumer goods, cement, oil marketing and manufacturing sectors.

According to Lotus, no sector will be allowed to account for more than 40 percent of the index which will be reviewed bi-annually.

The asset manager also disclosed that it had a buffer of 30 firms to consider for the inclusion at any one point but that stock liquidity, keeping to the Islamic principle is key.

On debt, it said total debt as a percentage of the firm's total value should not be more than 33 percent for it to qualify.According to analysts, global Islamic banking assets exceed $1 trillion and can reach $4 trillion by 2020. There is also an estimated $50 billion in managed funds invested according to Islamic principles in equities.About half of Nigeria's population is Muslims. This underlies the potential market Islamic investment has in Africa's second largest economy, and according to an Islamic banking analyst, "Islamic products are new in Nigeria but the uptake is growing in double-digits."

The NSE LII comprises of 15 stocks listed on the floor of the exchange namely: Okomo Oil Plc, PZ Plc, Unilever Nigeria Plc, Nigerian Aviation Handling Company Plc, GlaxoSmithKline Plc, Japaul Oil Plc, Cadbury Nigeria Plc, Dangote Flour Plc, Honeywell Flour Nigeria Plc, National Salt Company of Nigeria Plc, Nestle Nigeria Plc, Ashaka Cement Plc, Cement Company of Northern Nigerian Plc, Dangote Cement Plc and Lafarge WAPCO Plc.

NSE LII is certified by an internationally recognized Shari'ah Advisory Board comprised of renowned Islamic scholars among them are Professor Dr. Monzer Kahf a professor of Islamic finance at the MSC programme in the Qatar Faculty of Islamic Studies and Professor Muhammed Bashar head of the department of economics, Usman Dan Fodio University, Sokoto.

Speaking about the launch, the NSE Project Manager for the NSE LII launch, Mr Osahon Aire explained that investment instruments like Exchange Traded Funds (ETFs) can be built on the Index which investors with a preference for ethical/Shari'ah compliant investments can invest in.

He added that the launch will tactically aid the development of the market.Osahon noted: "The NSE Lotus Islamic Index will further illuminate the massive investment opportunities available to ethically minded investors, both in Nigeria and overseas. All the companies that will appear on the Index have been thoroughly screened by Lotus Capital Halal Investment in accordance with a methodology approved by an internationally recognized Shari'ah Advisory Board comprising of renowned Islamic scholars."

He explained that the launch of the Index is an exciting development that is in line with the NSE's mandate of broadening and deepening the Nigerian capital market.The index will provide a reliable benchmark for Islamic and other ethical investments. It can serve as an important diversification tool for ethically minded investors and portfolio managers both locally and from around the world, who seek to profitably invest in emerging African equities market. It will also reduce the research cost and time required by an investor to independently create Shari'ah compliant equity portfolio.

Speaking during the unveiling of the index, the Managing Director of Lotus Capital, Mrs Hajarat Adeola said the index was created to track the performance of Shari'ah compliant equities trading on the floor of the NSE.

Giving details of the index, Adeola explained that each stock in the index had undergone a two-stage screening process, adding that those companies that passed the initial test are evaluated on the basis of Islamic financial screens to eliminate those with unacceptable levels of debt, cash and interest income.

According to her, "Only companies that pass the second stage will be considered for further analysis", pointing out that other criteria such as liquidity and market capitalisation of the equities are also taken into account. "Each sector weight is capped at 40 percent and each component stock is capped at 30 percent and the index is rescreened, rebalanced and reviewed bi-annually on the first business day in January and July of every year," she said.

http://www.globalislamicfinancemagazine.com/?com=articles_list&aid=1435

Nigeria’s first Islamic bank begins business in three branches

Nigeria’s first licenced Islamic bank, Jaiz Bank Plc, has commenced full operation of non-interest commercial banking in Nigeria from three branches in Abuja, Kaduna and Kano.

A staff of the bank in Abuja Office said most of the early customers were groups of business institutions and private individuals from different religious persuasions making enquiries as well as opening different accounts.

The officer in Operations Department said the service of the bank was opened to everyone that is interested in the non-interest products.

The introduction of Islamic banking is part of a drive by the Central Bank of Nigeria, CBN, to propel Nigeria’s economy and promote financial inclusion by introducing alternative products. The non-interest regime offers veritable incentives and attractive options for investors.

At its inaugural Annual General Meeting (AGM), Chairman of Jaiz Bank, Alhaji Umar Mutallab said: “The whole idea of the banking option is to bring more people into banking in Nigeria that provides banking without interest.”

Mutallab, who was Chairman of FirstBank, further added: “This kind of banking is for all religions because no religion wouldn’t want to help, especially funding critical project without using interest elements.

“Whether it is Christianity or Judaism, every community wants to borrow money without being bugged down with multi-layer interest structure.

“This banking option is a product with a difference. We hope our brothers from the divide will see it as an ethical bank which is not meant to promote a particular religion. It is for all Nigerians and not Muslims alone. Once you have a viable project proposal which is ethical, which doesn’t cater for such things as liquor, gambling etc, it becomes a halal (lawful) project and would be looked into by the bank.”

Islamic banking, also known as participant banking, is banking activity that is consistent with the principles of Islamic law and its practical application through the development of Islamic economics. The system prohibits the fixed or floating payment or acceptance of specific interest or fees like usury for loans of money.

http://www.vanguardngr.com

Nigeria launches Islamic finance institute

The Governing Council of Bayero University, Kano-Nigeria has approved the establishment of an International Institute of Islamic Banking and Finance (IIIBF) in the University.

The Vice Chancellor Bayero University, Kano-Nigeria, Prof. Abubakar Rasheed has appointed Prof. Shehu Usman Rano Aliyu as the Director of the International Institute of IIIBF. Also appointed were the assistant directors training and linkages, research and publications and academic programmes, in the persons of Associate Professor Binta Tijjani Jibril, Dr. Nasir Ahmad and Dr. Mansur Idris, respectively.

The institute is currently advertising three postgraduate programmes which are due to commence in the 2012 academic session. The Institute is also inviting quality research papers for its forthcoming international conference in May this year.

http://www.cpifinancial.net

Nigeria: Experts Restate Great Future of Islamic Banking in the Country

An Islamic finance expert Hadiza Garba Laka has said the non-interest banking (Islamic-banking) has great potential for the Nigerian economy.

Hadiza Garba Laka of Lotus Capital Limited, who was delivering a paper recently at a public lecture organized by the Jama'atul Ta'awunil Muslimeen in Abuja, pointed out that Islamic banking has witnessed real time growth in UK, USA and Malaysia.

Also speaking at the lecture, Malam Mohammad Lawal Shaibu, an expert on Islamic banking and investment, said the interest-free banking is not a preserve of Muslims, explaining that the banking system is operated by Christians abroad since it is all about business.

Dr. Tawfeeq AbdulAzeez of University of Abuja, who was represented by Abu Mazeedatul Khayr said Islam prohibits usury because the religion is a complete way of life.

Malam Mosur Olaide, representing the Director General of the National Space and Research Development Agency, (NASRDA) Dr Saidu.O. Mohammad maintained that if conducted honestly and given a chance, Islamic banking will bring high moral ethos into the Nigerian market.

http://allafrica.com

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

Nigeria: Islamic Bank is Highly Profitable

Sheikh Ziyaad Mohamed is a Shariah Adviser and Islamic Finance Consultant. He is certified and trained in Islamic Jurisprudence, Quranic Science, Arabic and Islamic Traditions by scholars in South Africa, Syria, Eqypt and Jordan. In this interview with Daily Trust, he said Islamic banking will help in transforming Nigeria's economy and that it is beneficial to all people irrespective of their religious belief. He advises CBN to provide more information to educate the masses.

Why do you think the proposed Islamic banking is generating controversy in Nigeria?

Certain countries seem to be more sensitive to the introduction of Islamic banking primarily due to the religious connotations and misunderstanding of its principles.

The reality is that Islamic banking has already been embraced by many other countries with secular, Christian and Islamic systems. There has perhaps been a realization in those countries that the philosophy makes sense. It is profitable for all those involved, it promotes a high ethical standard, it is highly transparent and has a significant sense of disclosure. Even the United States and United Kingdom have introduced Islamic Banking.

The UK for example, has a minority Muslim population (+-4%), yet they have amended regulation to cater for Islamic banking. South Africa also has a minority Muslim population (+-2%) that has had Islamic banking since 1989. They have also amended regulation to allow for the successful functioning of Islamic banking.

Even Japan, who is a member of Islamic Financial Service Body of Malaysia (IFSB), has begun the introduction of Islamic banking. China is also introducing Islamic banking. Countries across Europe, Africa and Asia, notwithstanding the significant presence of Islamic banking in the Middle East, have begun embracing the Islamic finance and investment philosophy.

Some of the reasons that Nigerians are so concerned about introducing Islamic banking are perhaps due to mis-communication, misunderstanding and fear of the unknown. However, the underlying philosophy is open to all religions and stands to benefit anyone who wishes to participate in ethical banking.

What is Islamic banking?

Islamic banking is about ethical business transactions. It is about removing the moral hazard. It is about removing the practice of interest which is not something only unique to Islam. Other monotheistic religions including Christianity also do not accept usury. Islam is not the only religion that denies or prohibits usury; it is perhaps because the rules of prohibition are quite prescriptive and structured that it has achieved world prominence in a short space of time.

Islamic or non-interest finance focuses on the existence of a real, tangible asset. The rental of money (interest), the trade of a currency for anything except at par, is not permissible as it is seen as exploitation to some of the parties in the transaction.

The rules of Islamic economics can be applied easily as the legal maxim considers everything permissible in business transactions except what is specifically prohibited. These prohibitions include interest, uncertainty without due consideration (calculated risk), gambling, unfairness and injustice and the purchase and sale of unlawful products and services. These prohibitions are practical, moral and beneficial to all parties concerned. These restrictions are universal morals where most are accepted in all religions.

In Malaysia, you have two separate methods of finance. Conventional finance exists alongside Islamic finance, co-existing in harmony.

Islamic and conventional banking are existing and even working together in many instances around the world.

The implementation of Islamic banking is for the benefit of the entire community as it strives to promote socio-economic empowerment and upliftment through ethical means that restrict the use of the interest, etc.

Why is it as if Islam is coming out with something new? Muslims have a right to practice what they believe in as anyone does. Even so, Islamic banking can be practiced by anyone. It is open to everyone: Christian, Muslim, Atheist, anyone. It needs not be called Islamic banking, it can be called ethical banking or non-interest banking. Therefore, I personally feel that the suspicion around the introduction of Islamic banking can be resolved through basic knowledge on what it stands for.

Since Islamic banking is a non-interest banking, how do you make profit without charging interest?

The concept of interest is simply rent on money. Islamic economics, a 1,400 year-old system, is saying that the objective should not be rent on money. The focus should be the sale and rent of assets. If you own an asset you can rent it and make a profit from it. If you want to finance an asset, why not buy the asset and sell it and make profit. The profit is what is actually received by an Islamic bank that is then distributed to shareholders and depositors as dividends or profit. Islamic banks can therefore be highly profitable.

Interest has become the core of modern economics. The problem is that we have been programmed into believing that interest is the only way for an economy to progress and when we hear alternative philosophies, we think there is something dubious about it.

Most of us have lived a life of interest; we have taken and charged interest and we have implemented an interest rate but it was realized in 2009 that the entire world economy can collapse on the basis of interest and the sale of non-existent assets backed by securites (CD's, etc.). The evidence is public knowledge.

Why was it that Islamic banking did not suffer the worst of the crisis whilst conventional banks were collapsing?

It is because of an over reliance on interest and an over reliance on highly risky, toxic financial methods. Islamic financing does not allow that. Isn't that beneficial to the community and the country as a whole? Whether you call it Islamic or not is not the issue, adopt the philosophy, it makes sense.

Are you saying Islamic banking is based on certainty?

Therefore, we can say that transactions that are speculative in nature like the purchase of company shares due to a hunch or hot tip, property speculation and even the purchase and sale of assets that do not exist are all prohibited. One can remove as much uncertainty in a transaction as is possible.

It is based on calculated risk. There is nothing that is certain in life except death. However, the nature of transactions in conventional banking are focused upon the repayment and the interest on the principle, ignoring the real asset.

How?

Avoid any transaction that is highly risky. Avoid gambling and do not invest in derivative instruments because they would fall under the gambling definition. The financial crisis of 2009 has shown us that derivative instruments for example, have extremely levels of risk ultimately being the primary contributor to the collapse of world markets.

Why would anyone not want to adopt a philosophy that in fact moves nations out of poverty?

How does risk sharing in Islamic finance operate?

Islamic economics identifies inherent risk in equity transactions. The legal maxim clarifies that the one who takes the risk has the right to share in the reward. Islamic economics is simply saying that guaranteed returns via fixed interest rates place parties at a disadvantage, even the banks. The objective is for fairness in the transaction. If the investment returns a profit, the partners should be entitled to it according to a pre-agreed profit-sharing ratio. However, if there is a loss, both should share in the loss as well. This is both more equitable and more sustainable in the long-run.

How does the Islamic bond, the Sukuk, differ from the conventional bond?

The conventional bond is based on a coupon rate that provides you with a guaranteed return of interest but Sukuk is based on a return that is derived from investment in an asset. The returns that are derived are now distributed to the shareholders. It is based either on equity transactions, rental transactions, manufacturing or even a hybrid. However, the risk levels are comparable to bonds as they can be underwritten by governments and rating houses, providing credibility and assurance of repayment.

What advice would you give to the Nigeria government which is in the process of introducing Islamic financial system?

will say they are not the first to introduce it. Many countries around the world have introduced Islamic banking. They can learn from them and avoid the many errors that others have made.

Secondly, communication to the masses is the most critical aspect in the acceptance of Islamic financing. There would naturally be skepticism and fear in introducing any new system. Communication at all levels; at school level; at university level; at academic level; at banking level is very important.

The initial driver would probably have to be the Central Bank. Communication is critical to the understanding of Islamic banking. Islamic banking has no intention of Islamizing any economy but instead it is focused upon providing financing and return on investment through ethical methods, ultimately attempting to remove poverty and uplift the economy as a whole.

http://allafrica.com

Experts to Brainstorm on Islamic Finance

Investors, analysts, bankers and other financial operators will be exposed to the benefits of Islamic banking in a workshop staged by the Chartered Institute of Bankers of Nigeria and Lotus Capital Limited.

The workshop on Islamic finance and investment products put together by CIBN and Lotus Capital, according to a statement, is scheduled for 22 - 26, March, 2010, at Colonades, Ikoyi, Lagos, at 9.00 am.

It said, participants will have the rear opportunity of not only discussing and appreciating such critical issues and Sub-topics in Islamic Banking as "The Road Ahead: Realizing the Potential of Islamic Finance and Investment"; "Islamic Finance Contracts"; Successful Shari'ah Complaint Product Structuring"; "Islamic Finance: An Alternative Approach to Project Finance and Infrastructure Development" and "Creating Interest Free Bonds" but also hear directly from seasoned Islamic banking experts from Nigeria and abroad.

Top on the list of the high profile discussants include: Professor Dr. Monzer Kahf, of Qatar faculty of Islamic Studies, a Professional Lecturer, Trainer, Consultant and advisor of international repute in Islamic banking and Investment and Mrs. Hajara Adeola, Managing Director, Lotus Capital Limited, a convertible Bond Research Analyst of BNP Paribas, London and an accomplished Consultant at Andersen (now Accenture).

It is expected that at the end of the workshop, participants would be able to reasonably "understand the new global wave of Islamic finance and investment banking", "learn the Islamic finance instruments and structured products and their relationships with Conventional financing instruments" "understand Islamic Finance contracts", "Provide with an in-depth understanding of the growing Islamic investment funds, their structure and growth" and "Know how to structure Islamic insurance/Takaful products".

Link: http://allafrica.com/stories/201003180503.html

Faseun And Islamic Banking

Dr. Frederick Faseun needs little or no introduction in Nigeria. A medical doctor and self-styled President/Founder of the Odu'a Peoples' Congress (OPC), the ethnic militia that claims to be the defender of the Yoruba, he is a veteran of the organization's intermittent civil wars and of its battles against the regime of late General Sani Abacha and any one or group it regarded as anti-Yoruba.

Lately the man has been waging a personal war against Malam Sanusi Lamido Sanusi, erstwhile chief executive officer of First Bank who President Umaru Yar'adua recently appointed to replace Professor Chukwuma Charles Soludo - he of the banking consolidation fame and now controversial candidate of the PDP in the forthcoming governorship election in Anambra State - as governor of the Central Bank of Nigeria.

Sanusi, a Hausa/Fulani aristocrat like the president, says Faseun in a series of full page advertisements in newspapers entitled "Questions after Sanusi raided 5 banks," is unfit to be CBN governor for at least two reasons; he is an ethnic bigot and a Muslim fanatic. In Part 3 of the series in The Guardian of October 9 sub-titled "The Man Sanusi - Prey to Predator", Faseun quoted extensively from the man's numerous interventions in the past in national debates to prove his point.

Of the thirteen questions he posed in the advert about the character and competence of Sanusi to manage our apex bank, I found the sixth indicative of how shallow an otherwise educated person can get when he allows blind prejudice to get the better of his rational thinking.

"We have seen how his views are coloured by ethnic bigotry, what about his devotion to Arabic and Sharia Studies?" Faseun asked. "Of course," he said in self-reply, "all such derogatory comments against other nationalities within the Nigeria project surely put a question mark on Lamido Sanusi's qualification for the office of the Governor of the Central Bank of Nigeria. As soon as he seized the key to the CBN, he launched a personal campaign for Islamic banking, a very alien and sensitive affair in a country still mired in the Organization of Islamic Countries (OIC) and Shari'a controversies. But the question is whether Sanusi's first acts are not measures aimed at giving conventional banking a bad name in order to promote his pet ideas of Islamic banking."

Sanusi is, of course, very much capable of defending himself as he has shown in his many encounters with journalists and in his testimony before the Senate as governor-designate. So this piece is not out to defend him.

Even then I must say I found it strange that anyone would accuse the man of "seizing" the key to the CBN presumably to pursue an agenda of Islamic banking. As Faseun knows all too well, far from seizing the key to the CBN, the man got the job in spite of a most vicious and well-funded campaign in open and in secret to stop him from succeeding Soludo. He also got it after giving a good account of himself before the Senate on how he intended to sanitize the banking industry that was galloping towards a catastrophic implosion under Soludo's watch, in spite, some would even say indeed because, of his heroic effort at consolidation.

Similarly it is also strange that Faseun would argue that the measures that Sanusi has taken so far to sanitize the industry amounted to merely giving conventional banking a bad name in order to hang it. Only someone living on another planet would not have known that if anyone gave conventional banking a bad name it was the conventional bankers themselves, what with their opaque governance culture and the obscene and indefensible executive pay they gave themselves.

It is unfortunate that a man of Faseun's education would allow himself to be so driven by personal animosity that he finds it impossible to acknowledge that even the devil has his due, let alone someone whose villainy is debatable. And if the texts I received from the readers of my column in The Nation of August 26 on Sanusi's reform of Soldo's reform are anything to go by, Faseun must be among a tiny minority who believe Sanusi is a villain; of the 95 texts I received on the article, less than a dozen said he was pursuing any sectional or sectarian agenda.

Even more unfortunate than Faseun's apparent personal animosity towards Sanusi is his obvious disdain for Islam.

Faseun claims Islamic banking is "a very alien and sensitive affair" in this country. Sensitive? Perhaps. But alien?

If Islamic banking is sensitive in this country it is not because its application would do any damage to our economy. It is simply because people like Faseun who do not like Islam and whose views dominate our media suffer from this knee-jerk beggar-thy-neighbour attitude of objecting to anything the other person or group holds dear even when it could be of universal benefit.

I am sure Faseun and those like him who are instinctively opposed to anything Islam know all too well that Islamic banking has since established a global presence in Europe, Asia, America, Africa and, of course, the Middle-East. The last region may be overwhelmingly Muslim, but the rest are not. By some estimates Islamic banking in all these regions is now worth over $750 billion in assets. And the on-going global financial crisis has only led to even greater interest in it among financial experts and laymen alike the world over. This is for the simple reason that Islamic banking - and not surprisingly, the Holy Bible itself - forbids speculation which is the root of the crisis in Faseun's "conventional" banking.

Here I would like to refer Faseun and others like him who seem to think nothing good can come out of Islam to a survey entitled "Islam and the West" by The Economist - the West's pre-eminent newsmagazine whose editors are by no means Islamic Jihadists - dated August 6, 1994.

In a section of the 18-page survey sub-titled "The cash-flow of God", the author concluded thus: "The economics of Islam, in short, is not as special as its enthusiasts claim; but neither does it deserve the usually rather ignorant sneer it gets from many non-Muslims. As one bright Malaysian banker says, 'If the scholars of the Koran had economic degrees, they would understand what we are trying to do!' And if Western economists knew more about the Koran, so would they."

Even without any understanding of the workings of Islamic banking anyone with half an eye can see that there is nothing inherently bad about it. And as for Faseun's claim that it is alien to Nigerians, nothing could be more fallacious and untenable.

Islamic banking alien in a country at least half of whose population is Muslim? Haba! How blinded by our prejudices can we get!

Link: http://allafrica.com/stories/200910280453.html

Expert puts Islamic banking market in Nigeria at N4.35tr

IT has been revealed that as at December 2008, the estimated Islamic banking market in Nigeria was N4.35 trillion.

The Managing Director, Jaiz International Plc, Mohammed Bintube in Abuja, revealed this recently during the second innovation forum of Enhancing Financing Innovation & Access (EFInA).

The theme of the forum is "Increasing Access to Finance Through Non-Interest (Islamic) Banking."

Also EFInA's Chief Executive Officer, Modupe Ladipo, stated that the results from EFInA's 'Access to Finance 2008 Survey' showed that 92 per cent and 86 per cent of the adult population in the Northwest and Northeast geopolitical zones respectively were not involved in banking activities in the light of which Islamic finance was considered a potential innovative approach to increase access to finance.

Speaking at the innovation forum, the Central Bank Governor, Sanusi Lamido Sanusi lauded EFInA for hosting a forum on such a topical and important issue that could have a significant impact on improving access to finance in Nigeria.

He said that the introduction of non-interest banking would deepen the financial sector, open new markets, enhance product offerings engender new competition and enhance investment in the economy.

He reaffirmed that establishing non-interest banking was one of the initiatives to establish Nigeria as a hub for financial services in Africa. He stated that Central Bank of Nigeria recognised that the critical success factors were promotion and collaboration between stakeholder agencies, finance ministry officials, judiciary and securities industry regulators to develop a robust framework.

The international guest speakers at the forum Mr. Omar Shaikh and Mr. Safter Sarwar from the Islamic Finance Council, United Kingdom a not-for-profit organisation, established to promote the Islamic finance industry both locally and globally shared their views on the state of the global Islamic finance industry, and highlighted that the industry was worth approximately $1 trillion and growing between 15 per cent to 20 per cent per annum.

Among leaders in the Nigerian financial sector who shared their perspectives on the opportunities and challenges of providing Islamic finance in Nigeria was Mrs. Hajara Adeola who highlighted the potential of Islamic bonds (Sukuk) to attract local and foreign investments for infrastructure, citing the $1billion Emirates Airport, Dubai as an example.

The managing director, Jaiz International Plc, Mohammed Bintube, stated that as at December 2008, the estimated Islamic banking market size in Nigeria was N4.35 trillion.

Link: http://www.ngrguardiannews.com/business/article07/indexn2_html?pdate=130809&ptitle=Expert%20puts%20Islamic%20banking%20market%20in%20Nigeria%20at%20N4.35tr

Nigeria opens market for Islamic finance

LONDON: Within the next two years the Islamic finance sector in Nigeria will be "very vibrant" with huge opportunities in virtually every asset class, according to Mohammed Lawal Shuaibu, area manager of Diamond Bank, one of the largest in the country.

This follows the introduction of the Law Governing the Operation of Islamic Banks by the Central Bank of Nigeria in mid-March 2009 thus bringing the authorization of Islamic financial institutions on par with the same provisions relating to conventional banks. "Until last month some institutions were doing Islamic deals on an ad hoc basis. Now that the law has been passed, we will see a rapid growth of such products because the demand is there and the market has been bereft of Islamic products so the starting base is low," explains Shuaibu.

Some 65 percent of Nigeria's estimated 150 million population is Muslim. Thanks to the oil price windfall, there is huge disposable income in the country, albeit that the oil wealth is still largely concentrated in the hands of the elite few.

Africa as a continent has been slow to take to or attract Islamic finance at the same scale say as the GCC (Gulf Cooperation Council) countries, Turkey or Malaysia. South Africa was the first sub-Saharan African country, excluding Sudan, to start Islamic banking in earnest in the 1990s with the establishment of Albaraka Bank (SA), part of the Bahrain-based Albaraka Banking Group. Since then local banks such as First National, ABSA and Nedbank are all offering Islamic products; while asset managers such as Sanlam and Oasis Group are offering Shariah-compliant equity and pension products.

Kenya at the same time last year authorized two Islamic banks -- Gulf Arab Bank and First Community Bank following the introduction of an Islamic banking law. Egypt, Algeria, Tunisia, Senegal, Gambia and Djibouti have all got the odd one or two Islamic financial institutions, but in general they are ineffective because the regulatory and financial environment in which they operate are not friendly to Islamic finance. Sudan is the only country where Islamic banking is well established but the scale and scope is parochial and there has been evidence in the past of governments exploiting the sector for its own fiscal and monetary policy aims.

Nigeria, one of the richest and largest African economies was the exception in that Islamic finance like anything Islamic until recently remains a potentially sensitive issue. But in an era of globalization, as Shuaibu stresses, "If the UK can have Islamic banks, and the US and EU are contemplating similar institutions, why can't Nigeria have Islamic banking. We cannot afford to be left behind as a country?"

Diamond Bank, which is a fully-fledged commercial bank and is capitalized at 25 billion naira, is in the process of establishing a dedicated Islamic banking window, "since there is now a legal framework that governs Islamic banking."

The Central Bank of Nigeria has given another entity, Jaiz International, a temporary Islamic banking license on the condition that it would get full authorization if it gets the full capitalization of 25 billion naira, which according to Shuaibu, it has thus far failed to do.

The Central Bank of Nigeria has also set up a National Shariah Advisory Board for Islamic finance and is also in the process of convening an Islamic finance advisory group comprising market players and other interested parties to advise and deliberate issues relating to the sector.

Muhammadu Sani Jada, special assistant to Gov. Murtala H. Nyako of Adamawa State in the northeast, is similarly confident that "the federal government has opened the market for the Islamic finance industry. It is up to the investors, financial institutions and other interested parties to come and take up the challenge of establishing Islamic banking in Nigeria."

Jada sees huge potential for Islamic finance in the real economy in Nigeria especially in Adamawa State, which is the breadbasket of the country. "We are interested in investments and partnerships based on Musharaka and Mudaraba in order to accomplish people-oriented development projects and infrastructure. We are going to look at all the Islamic financing options."

The main problem for Nigeria is the perception of its country risk and the rampant corruption. Both Jada and Shuaibu stress, that no market is free of risk as the current financial crisis has proven. On the contrary, the Nigerian economy has improved tremendously over the last few years and return on investment in most sectors is very attractive. Nigeria, they stress, "is a goldmine for those who want to come in and have patience."

They urge any investors or Islamic banks interested in doing business in Nigeria to do their due diligence and tie-up with reputable local entities as a first step. But there is a further recourse to risk mitigation. The IDB (Islamic Development Bank) Group through its export credit and investment insurance entity ICIEC (Islamic Corporation for the Insurance of Investment and Export Credit), following discussions with Diamond Bank, is ready to provide country risk insurance for those who need extra comfort.

By Mushtak Parker

Link:

http://www.zawya.com/Story.cfm/sidZAWYA20090413031515/Nigeria%20opens%20market%20for%20Islamic%20finance

Nigeria: Advocating Islamic micro-finance banking to reduce poverty

THE Principal, Association of Oasis Associates, Malam Ahmad Dogara has given nod to Islamic Micro financing in the Nigeria’s banking system, saying it could serve as a speedy remedy toward poverty eradication in the country.

Presenting a paper during Micro-Finance Investors Forum, organized by the Central Bank of Nigeria (CBN), held in Kano, Dogara believes that Islamic Micro-Finance could similarly be an excellent substitute for the conventional micro-finance currently being implemented in the country.

“In recent years, micro-finance has emerged as an important instrument to help a large number of unbreakable members of the society as a means of reducing poverty and encourage economic growth in neglected parts of the world”, the economist said.
Dogara, howeverm, lamented that inspite of its prior success, conventional micro-finance was found to be not fully reaching the poorest of the poor, while loans were going to activities unrelated to entrepreneurs.
“It was similarly discovered that over 1bn of the world population had lived under unacceptable condition of poverty and most of the people belonged to the developing nations, particularly the rural dwellers in Asia and the pacific Africa” he further explained.
“Still over the years, report had shown that over 30,000 people in the world die everyday because they were too poor to stay alive,” stressing that in some Muslim communities, conventional invest based microfinance has always been ejected, principally for its non compliance with the Islamic principles, particularly on the issue of interest” he said.

“While conventional microfinance institutions (MFIs) was always criticized for sharing exorbitant interest rates and fees, Islamic microfinance could arguably help current the short comings, since it focuses on achieving social justice, disallows exploitation and battles poverty as well,” he explained.

Another presenter, Hajiya Talatu S. Bashir while speaking on “the relevance of microfinance business in Nigeria: the need to establish microfinance banks” explained that even a cursory observer of the Nigerian economy could concede that poverty was assuming on alarming proportion in the country.

According to her over 75 per cent of Nigerians live below $1, which was equivalent to N178 per day expressing fear that this was more prevalent in northern Nigeria.