No one needs to be an economist to understand the classical assertion that “money is sterile” and wealth can only be genuinely created through assets (physical or intellectual assets). But because providers of funds are often different from users of funds; probity demands that returns on used-funds should be appropriated between the two parties.

This return could be a fixed portion of one’s contribution (Interest) or a fixed portion of returns on one’s contribution (Profit Sharing). If this does not look like two sides of the same coin, it is because they are different with reservations. But why the hullaballoo about non-interest banking proposed by Central Bank of Nigeria?

I emphatically declare that there is nothing wrong (in principle or practice) about Islamic Banking. Besides the massive assets controlled by concerned banks (about $500 Billion) with average annual growth rate above 10%; Torah (which provides common dictum for both Judaism and Islam) forbids usury.

But when Central Bank of Nigeria (CBN) decides to designate a specialised Non-Interest Financial Institution to operate under the principles of “Islamic Commercial Jurisprudence” in a country where two brothers are ready to kill each other on varying religious beliefs, I have got some rhetorics for CBN based on the guidelines released.

Why dividing Non-interest banking and finance model into 2 (one based on Islamic Commercial Prudence and the other on “Any other principle)? When CBN could simply license Non-interest banking based on any non-interest principle and allow banks like JA’IZ Bank (and other Sharia Compliant bank like IBB in UK) to define their product compliance?

This categorization will not raise any issue if there are guidelines (in pipeline) for Amadioha Commercial Jurisprudence, Sango Commercial Jurisprudence, Penticostal Commercial Jurisprudence, Protestant Commercial Jurisprudence, Rosicrucian Commercial Jurisprudence, among so many that we know have different business ethics.

We do not need the division the niche categorization is bringing. A non-interest banking licence which enables each institution to tailor its products towards its market of interest would have served all without all this religious sentiments in which CBN seems to be the one playing the drum.

If I were to deposit my cash in a non-interest-giving institution, I will need to know where they are investing my cash into to consider the risk of return and the weight of outcome. And I will certainly recline if it comes to financing gambling, speculation, unjust enrichment, exploitation or unfair trade practices. But when CBN defines “dealing in pork” as a non-permissible transaction (a big segment of livestock farming); is there an economic or religious justification for this?

My last employer in the banking sector then avoided touching livestock financing like a plague simply on business justification but when CBN picks out a particular animal that gives a company like Smithfield Food annual revenue of $12Billion (4 years ago) greater than aggregated internally generated revenue of so many single states in Nigeria within same year (Abia, Kebbi, Katsina, Plateau among others) then CBN creates the avenue for the hullaballoo when each institution could simply decide product areas based on their belief or strategies.

If “murabaha”, (credit that enables customers to make purchases without taking an interest-bearing loan) becomes prevalent; the banks can veer into procurement for customers and avail the goods to customers with margins. There are more technical areas for CBN to handle than simply bringing grey areas of a presumably mere product that has been exalted to a sub sector.

Why requesting evidence of a technical agreement executed by the promoters of proposed institution with an “established and reputable Islamic bank or financial institution” when a technical agreement with a “reputable bank with background in the product/service they want to offer” would have sufficed?

CBN is licensing banks based on Belief-Jurisprudence and they are marked to be regional banks such that they shall be entitled to carry on banking business operations within a “minimum of six (6) and a maximum of twelve (12) contiguous States of the Federation, lying within not more than two (2) Geo-Political Zones, as well as within the Federal Capital Territory (FCT)” and we blame those who accused CBN of regional agenda? A bad reminder of post-election North East, North West, North Central, South East, South South and South West?

The same bank has the permission to receive commissions and fees, all it needs to do is not to share such with depositors (less, it may look like earning income without any outlay)?

CBN is either mixing up facts or simply trying to becloud simple reasoning. Islamic banking was an approved product for former Habib Bank, just the way other specialized products were approved for other banks then but present stature giving to Islamic banking is different and should not be used as history of subject in the discussion.

Likewise the much references to Islamic Banking of Britain; when FSA authorised the first wholly sharia-compliant bank (IBB) in 2004, it was clearly stated that the bank will operate under a single piece of legislation that applies to all.  “The FSA’s policy towards Islamic banks, and indeed any new or innovative financial services company, can be summed up simply as “no obstacles, no special favours”. We are keen to promote a level playing field between conventional and Islamic providers. One thing we are clear about is that we are a financial, not a religious, regulator.”

CBN should give interest-free-banking licence to those considered competent and let each institution carve out its market niche with related products. And whatever name an institution chooses to adopt should be left to them (as long as it does not contravene those exclusive names in BOFIA). Besides nobody will be forced to go and bank with any bank.

No problem with Islamic Banking, CBN is the issue

Soludo evoked the 1st Pillar of Basle Accord (Capital Adequacy) to bring down some functional but marginal banks in 2004. Sanusi evoked the 2nd Pillar of Basle Accord (Asset Quality) to bring down Soludo’s mega but toxic-asset infested banks in 2010. We must know that the 3rd Pillar (Internal-Based Ratings) can bring down any institution built now and customers will always be victims of this financial chess game.