Nigeria is located in the southwestern part of the African continent and is the most populated black nation in the world, with a population of about 170 million. The population of the country is divided along the regional line with about 60% Muslims living in the northern part while the southern part of the country is dominated by Christians which constitute about 42%. So, AHMED USMAN asks, why is Islamic banking lagging in northern Nigeria?
Islamic banking is an alternative banking system that is based upon Shariah principles which prohibit transactions that involve interest (Riba), uncertainty (Gharar) and Maysir (gambling) in business and commercial activities. Shariah also prohibits a Muslim from being involved in business that is not permissible such as the production and sale of alcohol, dealing in weapons (except for self-defense), sale of pornographic materials, tobacco, etc. Interest which is a major sin in Islam is the bedrock upon which a conventional banking system is established. It is therefore necessary for every Muslim to abide by the various Quran injunctions and sayings of the prophet (SAW) by avoiding interest in order not to be punished by Allah.
It is with this background that the former governor of the central bank introduced Islamic banking as an alternative means of finance, and the license was issued to one fully-fledged bank (with regional authorization) and some other windows. Closely related to this is also the concept of Takaful (Islamic insurance). Various Islamic banking products were developed and new ones will also be developed in order to meet the diverse needs of the population.
These products are designed to enhance the quality of living of the populace through the provision of investment opportunities, risk protection mechanisms as well as communal help and assistance. But all these practically have no meaning currently because a large part of the populace are not aware of the existence of the Islamic bank in their region, and the ones that are aware are not conversant with the available products and their features. Hardly six or seven people out of 10 are aware of the available Islamic banking products and their features.
I can recall my discussion with one Muslim brother on prohibition of interest in the process of my research. The man was over 50 years of age and well educated (westernized) but displayed his ignorance on prohibition of interest. He was even surprised when I told him I resigned from one of the strong and reputable banks in Nigeria because the bank is a conventional bank and interest constitutes the major practice in the bank.
On another occasion, I encountered one young Muslim man who was driving a commercial vehicle. When I asked him to take me to any of the three existing Islamic bank branches in the city where he lives and works, I was surprised he did not know the existence of any Islamic banks in the city.
This gap can partly be attributed to a lack of awareness which in turn is due to the lack of wide coverage by the banks, because most of their awareness campaigns are geared towards liability generation and asset creation. They do not take the time to educate people on the products they offer and how they operate. The gap can also be partly attributed to the populace especially Muslims because a lot of Muslims from the north were excluded from banking and insurance activities in the belief that such activities are against their religion and no other alternatives were available. Now that they have one fully-fledged Islamic bank and some windows in their region, Muslims will have an alternative means of banking that do not have the previously mentioned prohibitions by Shariah including interest that constitutes the major practice in conventional banking.
There is no strong commitment on the part of banks to reduce this gap as most of their advertising campaigns are either meant to mobilize deposits or create assets. In this regard, the Islamic bank in Nigeria is also like a conventional bank as it has no such concern for the poor. It is my belief that if properly implemented, their services will help significantly in reducing the level of poverty and foster socio-economic development of the people in northern Nigeria.
For the region to achieve these, Islamic banks must come out fully and actively to create a wide range of awareness campaigns through the media and social and religious gatherings.
People should also wake up to learn how Islamic banking products operate since it is the only banking system that is mostly acceptable in the region.
Ahmed Usman is a senior manager, Audit and Inspectorate Department, Nigeria Social Insurance Trust Fund. He can be contacted at [email protected] .