By Babajide Komolafe
The newly introduced non-interest banking especially Islamic banking, can lead to financing of religious fanaticism and terrorism, says economic experts.
“Nigeria has, and continues to suffer from religious fanaticism and sectionalism. With the financial systems still suffering from the consequence of, amongst other factors, weak supervision, the CBN and other regulatory bodies to be charged with supervising Non-Interest Financial Institutions (NIFIs) must be well prepared and trained. Failure in proper regulation of NIFIs might not only lead to financial losses but perhaps financing for religious fanatics and terrorism. This must be prevented by all means”, they said in Lagos last week.
This position was contained in a communique issued at the end of a one-day seminar on Repurposing capital: Non-interest Banking in Nigeria, co-sponsored by Apostles in the Market Place (AiMP), a network of Christian professionals and leaders, and BusinessDay Media Limited, publishers of BusinessDay Newspapers.
The communique said: “There should be a shift in focus to Profit & Loss Sharing banking and Faith-Based Financing (FBF), rather than a more narrow definition of Non-Interest Banking (NIB).
“NIB and FBF, if properly regulated and administered, have the potential to transform the economies of underdeveloped communities, hence is a welcome development in Nigeria where on-going banking reforms have made interest-charging deposit money banks more risk averse and perhaps unwilling to venture into virgin frontiers in banking. The unbanked and under-banked in Nigeria will benefit from FBF where risk and returns are shared between provider and user of financing.
There is, however, need for a supervisory framework that recognizes the peculiarities, applicability and potential of FBF including the following: Stimulating grassroots, relationally-based investing (versus debt-based financing),Countering corruption through transparency and other faith-based financing (FBF) principles; Avoiding speculative bubbles and decreasing reckless investing; Avoiding consumer and other debt that is detached from real assets and initiatives.
“The initial (Jan 2011) NIFI framework was limited in its application as it equated NIB to Islamic Banking, in effect, barring potential non-Muslim or non-Shariah-compliant investors and participants from tapping into the benefits of NIB. The framework clearly demanded that NIFI “transacts banking business, etc and commercial activities as well as the provision of financial products and services in accordance with Shariah principles and rules of Islamic commercial jurisprudence.”