CBN and Islamic Banking

The CBN Governor was quoted has saying that the prevailing economic meltdown has increased the demand for Islamic financial products and services across the world. And according to him, in spite of the crunch, Islamic institutions have displayed "strong resilience reflecting their conservative approach to business, balanced and ordered appetite for growth and focus on the basis of financial intermediation as opposed to innovation." And as result, the CBN will soon introduce Islamic banking in Nigeria to help stabilise the sector as fallout from the problems it is experiencing.

The CBN Governor’s statement has however generated some much controversy. Some have argued that being a secular state, Islamic banking cannot be practised in Nigeria. There is also a growing section of the Nigerian society who feel that Mallam Sanusi’s statement gives credence to the conspiracy theory that he is only acting the script of the northern cabals, who are alleged to be bent on taking control of banking sector. But I’m still at a loss regarding the relationship between the so-called Northern Agenda and Sharia banking. How can anyone be sure that principles of Sharia banking favours everyone in the north. To describe the proposed introduction of Sharia banking has a “Northern agenda” smacks of ignorance. What is the definition of Northern Nigeria? Is it everyone in Northern Nigeria that actually supports the Sharia system? Anyway, that is an aside issue.

Islamic banking is not a new phenomenon, even in other secular nations. For the example, the first Sharia bank in Western Europe was established in the United Kingdom in 2004. Major high street banks such as Lloyd Banking Group and HSBC also offer Islamic banking products to interested customers. It refers to a system of banking or banking activity that is consistent with the principles of Islamic law (Sharia) and its practical application through the development of Islamic economics. The overarching principle of Islamic finance and banking products is that all forms of interest are forbidden. The Islamic financial model works on the basis of risk sharing.

However, in spite of the acceptance of Islamic banking into mainstream banking in Western secular nations, it does not fit into the current Nigeria banking system. This is primarily because there are no laws permitting Islamic banking in Nigeria. The nation’s financial regulatory framework does not permit any form of religious banking. This however does not mean it cannot be introduced. It only means that changes will have to made to the nation’s banking laws.

So does introduction of Islamic banking means Islamisation of the nation? My answer to that is No! As noted previously, the introduction of Islamic banking will require massive changes to banking laws. Personally, I have no issue with the introduction of Islamic banking as long as it is not been forced on everyone. The principle of secularism demands, the state should not be promoting any religion directly or indirectly. All citizens should be treated equally regardless of religion, and preferential treatment should not be given to any person from a particular religion over other religions. Therefore, the CBN policy towards Islamic banks, will need to be “no obstacles, no special favours”. The CBN will have to promote a level playing field between conventional and Islamic banking providers. It is the role of the regulator to ensure that the ethics of such banking practices does not undermine the integrity of the national economy.

For me, if the introduction of Islamic banking will bring in the much needed foreign investment into the country, then why not? We need not to be hypocritical about some of these things. The religious jingoist do not want Islamic investments in our banks but are happy to have Arab companies such as Etisalat, Zain operating in our mobile phone industry. We may need to remind such people that these companies originate from Islamic nations.

Also, what stops other religious organisation from raising enough capital and applying for a bank licence. We already have religious organisation investing heavily in the education sector. If religious organisations can be granted licence to establish faith-based schools, then why not banks?

We are a nation of diverse religious beliefs, and if anyone believes religious banking practices is in line with his belief, then let him or her do so. As long as it is not to the detriment of the national economy.