Islamic banking has not gained full acceptance in every part of the country. In spite of this, Jaiz Bank is poised to take its project nationwide. Reporter HENRY ODUAH writes…
A loan from conventional banks anywhere in the world comes with interest. When you manage to get a loan, short, medium, or long-term, you also meet the conditions for paying up the loan and the interest within a stipulated time or face the consequences.
For the survival of commercial banks, profit making is non-contestable. A customer with a leading bank in Nigeria confided in TheNiche stressing his frustration at the profit-driven ideology of banks.
He said when the Central Bank of Nigeria (CBN) introduced Bank Verification Number (BVN) last year, banks did not demand BVN to accept deposits, but demanded it for one to make withdrawal.
Non-interest banking
Non-interest banking is a profit-growing global phenomenon practised in countries such as the United Kingdom, Canada, United States, United Arab Emirates, Malaysia, China, Singapore, South Africa, and Kenya.
It is also on offer in global financial outfits like HSBC, Citibank, and Barclays Bank.
Interest free banking offers almost all the services offered by conventional banks except that interests are not charged when loans are given out, nor do they finance anything classified harmful to society like alcohol, tobacco, gambling.
Non-interest banking is synonymous with Islamic banking. And since Islam does not support alcohol, tobacco, gambling, banks founded on Sharia ethics ensure their loans do not fund such activities.
Jaiz to the fore
Jaiz Bank announced in May that it had secured licence to operate in all the 36 states of Nigeria, including the Federal Capital Territory (FCT), Abuja. Prior to that, it was only authorised to operate in regions.
Its Chairman, Umar Muttalab, disclosed this to the Sultan of Sokoto, Saad Abubakar at a meeting to brainstorm ways of making the bank function better.
He said the bank will improve services through its various arms and promised a better deal for customers.
“As a regional bank, Jaiz has operated in 12 states (in the North) but with the new licence we can now spread to all parts of the country. We will open branches in the 36 states of the federation,” Muttalab disclosed.
To strengthen its position and assure customers of continuity and improved services, the bank has the Islamic Development Bank (IDB), a multilateral financial institution, as a major shareholder.
In the beginning
Created as Jaiz International Plc in 2003, Jaiz Bank opened shop as a regional bank on 11 November 2011. It began full operation as Nigeria’s first non-interest bank on January 6, 2012 with three branches in Abuja, Kaduna, and Kano.
The regional licence to do business in a third of the country with Islamic dominance made it to operate in the North East and North West is guaranteed.
The public debate in 2009 if Christians can bank with Islamic banks made the groundwork for what could today become widely accepted in all parts of the country where Muslims or Christians dominate.
Growth amid cash crunch
On May 31, Jaiz Bank declared a profit after tax (PAT) of N794.2 million for the 2015 financial year, a 576 per cent increase compared with N126.8 million in 2014.
Mutallab said at its fourth annual general meeting (AGM) that the performance demonstrated continued growth and operational efficiency as income also grew 47 per cent to N4 billion from N2.72 billion in 2014.
The bank recorded significant growth total assets which closed at N52.6 billion against N44 billion in 2014.
New man at the wheels
Hassan Usman took over from Mahe Abubakar after being appointed as substantive managing director by the bank’s board of directors at the AGM.
Usman, whose appointment is still subject to the approval of the CBN, is expected to drive the bank’s national agenda from where his predecessor left off.
Abubakar said the bank provided financing worth N25.39 billion to 1,507 customers in 2015 from 1,076 in 2014.
“With this major milestone achievement, we face 2016 with a lot of optimism to deliver significant level of profitability that will see us pay dividend by the end of year 2017,” Abubakar enthused.
Part of Usman’s mandate is to establish branches in all regions of the country and increase customer base which would in turn tell in the bank’s income.
He is not a greenhorn as he had been the bank’s managing director in 2013.
What lies ahead
With the looming national competition, Jaiz Bank intends to break the assumption that it is exclusively for the Islamic faithful. It plans to expand its reach to all regardless of ethnic or religious beliefs.
But as the bank’s Islamic origin cannot be overlooked, non-Muslims may be apprehensive in embracing its ideas and propositions.
Survival test
Although banks look out for their customers’ interests, they also do not ignore their own interests which is profit making. Many question the long-term survival of Islamic banking with zero interest loans.
Eugene Onyeji, a chartered accountant, explained that the bank makes profit through trading, leasing, and partnership with business outfits where profit sharing is pre-agreed.
His words: “Jaiz Bank is not the only non-interest bank, Stanbic IBTC Bank also is. Although Jaiz is the first to have full-fleshed authority to do such banking.
“They make money through buying and selling. They can buy an asset and sell for profit. Non-interest banks are the only institutions authorised to engage in trade.
“They also go into leasing, that is, giving out equipment and machinery on a rental basis. By law, they are also permitted to go into partnership or joint venture based on pre-agreed profit and loss sharing formula.”
Public acceptance
Sunday Omoju, a resident of Gombe State where Jaiz Bank has a heavy presence, has no account with the bank but does not rule out the possibility of doing business with it in the future.
“I don’t see anything wrong with banking with it so long it carries out banking activities like every other bank.
“If I have to weigh its acceptance by Christians here, I would say 10 per cent. And the reason is not far-fetched from the mentality surrounding its establishment. It is perceived to be a Muslim bank meant for Muslims,” Omoju said.
A Lagos resident, Emmanuel Ihejirika, insisted that interest-free banking is a sham to attract customers.
“I take my time carefully to select my bank. This interest-free banking is just something to attract customers before they change, just like telecommunications networks do,” he argued.
But Abia resident and businessman, John Anyanwu, would gladly accept the proposals of the bank as soon as it establishes branches in the state, though he is sceptical of its acceptance in the zone.
He said: “Of course, I will collect loans from it without a second thought. I am a businessman and anything that will work for my good, I will embrace it.
“But with the situation of things in the country, I don’t think it will receive much acceptance here in the South East.”
Onyeji, however, said the growth of the bank shows gradual acceptance by even non-Muslims.
“Christians have no choice. The bank has come to stay. In fact, I can say that 30 per cent of their customers today are Christians and I know some Christians who have been given facilities to do business since the bank began operation,” he added.
“As long as you have a good proposal, if you approach the bank, it will review it and if it is found worthy, of course it will give you a loan, whether you are Christian or Muslim.
“It has nothing to do with Muslims alone except that it is founded on Sharia principles and ethics. Even among their employees, I’m sure there are Christians.”