CBN to extend Islamic banking to other financial sectors

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By MICHAEL EBOH

THE Central Bank of Nigeria, CBN, said that plans are underway to extend the non-interest banking or Islamic banking principles to non-banking financial services. Some non-bank financial institutions, such as insurance companies, fund managers stockbroking firms have already introduced to the market products designed after the Islamic banking model.

Speaking at the 16th annual CBN seminar for financial market journalists in Adamawa state, Special Adviser to the CBN Governor on Non-Interest Banking, Dr. Bashir Umar, in his paper titled, ‘Overview and Conceptual Issues of Non-Interest Banking in Nigeria,’ said that the apex bank will ensure that the proposed introduction of non-interest financial services will not be limited to banking services alone.

Also speaking in his keynote address, CBN Governor, Mallam Sanusi Lamido, said that non-interest banking will make a major impact on the Nigerian economy, considering the size of the country’s market and the population.

Sanusi who was represented by Mallam Dahiru Mohammad, Member of the CBN’s Board, said that the introduction of Islamic banking becomes necessary, especially as some countries in West Africa are already positioning to enjoy the benefits of the non-interesting banking.

According to him, a number of these countries had already started the processes of establishing the enabling regulatory framework for non-interest banking to thrive in their respective jurisdictions.

Historical antecedents

He said, “Drawing an inference from historical antecedents, the Islamic financial system, on a global scale, has witnessed a progressive evolution over the last four decades to become a dynamic and competitive form of financial intermediation within the global financial system.

“The facts also have it that it has recorded a dramatic growth, rising to about 435 institutions operating in 75 countries around the world, including major financial hubs such as London, New York, Luxemburg, Malaysia, Hong Kong and Singapore, just to mention a few.”

“Suffice to say that countries like Senegal and the Gambia already have operational regulations governing non-interest banks. In addition, several other countries in Africa are at various stages of crafting and consequently executing their regulatory guidelines.

Sanusi said that the theme of the seminar, “Non-Interest Banking, Issues, Challenges and Prospects,” was very apt, considering the desire of the apex bank to broaden accessibility to alternative financial product by the country’s productively-active poor through the introduction and implementation of the new microfinance policy.

He also noted that despite the modest progress made in introducing non-interest banking in the country, it had been faced with challenges such as dearth of knowledge, skills and technical capacity to regulate and supervise the product, limited knowledge of accounting and auditing standards pertinent to Islamic financial institutions, lack of robust and comprehensive legal guide, the absence of Islamic insurance to protect investments of Islamic banks against unforeseen hazards that could impair the growth of this form of banking, among others.

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