The CBN governor recently appeared before the House of Representatives explaining the rationale for interest free banking aka Islamic banking. I read in some papers that he wowed them with his mastery of the business and came out smiling as the Honourable members could not ask questions. While many people have written about the benefits of the so called Islamic banking there are still others who do not feel comfortable with its introduction.
The reasons for and against are not far- fetched. Those who are proponents say: Islamic banking brings innovation and facilitates diversity. They also say Islamic financial products are available in many countries including the UK from a number of High Street banks and offer current accounts and mortgages tailored for Muslims.
Though I am not a banker, but reading about Islamic banking tells me that 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. The customer and the bank share the risk of any investment on agreed terms, and divide any profits or losses between them. In addition, investments would only support practices that are not forbidden ÔÇô trades in alcohol, betting and pornography are not allowed. Moreover, an Islamic banking institution is not permitted to lend to other banks at interest.
The main advantage I understand is that having access to Sharia-compliant banking products provides financial services to people whose faith prevents them from using the kind of products that are normally offered by Nigerian financial institutions.
Those who are against have their arguments too. For example, they say, it is a back way of Islamising the country. Some say at a time as we are in Nigeria when tension is very high between Muslims and Christians with Boko Haram struggling to Sharianise the country, selling a product that vividly projects a religious sect is not being sensitive to the security situation in the country. So they are quarrelling with the timing of the policy.
Both sides have their points but to me the key issue is not Islamic banking or whatever name it is called. It is our style of doing things. The knack for people in authority thinking they know everything all the time and show much disregard they have for the citizens. I hope these people realise that policies are meant for the people and not for the policy makers.
There is a lack of understanding of what Islamic banking is all about. There is also a high level of suspicion on the part of those who are against it. I understand some Christian leaders have spoken out against its introduction. There are also some people who have come out publicly supporting its introduction that are not Muslims. So definitely it is not about the rubrics of Islamic banking.
Sanusi said the process of commencing Islamic banking in Nigeria was set in motion in 1991 when an Act of Parliament was passed approving its establishment while the draft framework was approved in 2009. So what has the Central bank done since then? Apparently, Islamic banking was on the cards when we introduced community banks that seem to have failed. Was there any consultation in 1991 before the Act was passed? We should understand that things are changing fast in Nigeria.
Has Sanusi and the Central bank done enough to convince Nigerians? Your guess is as good as mine. I thought we have central banks in almost all states of the Federation. So why the various states branches could not hold consultations in the states to get a feel on the level of acceptance of the policy is beyond my understanding?
Sanusi has said the policy was initially approved by Soludo. What he is telling Nigerians is that he Soludo is a Christian and he wanted Islamic banking. I am sorry but that is totally irrelevant. He Sanusi was not appointed because he is a Muslim. He was appointed because the people who appointed him believe he can deliver on the promotion of a sound monetary policy for the country. Unfortunately, he has also fallen into the religion quagmire.
Sanusi knows too well that when he was in First bank, he could not introduce/implement policies without taking onboard what shareholders think. This is why I worry about the methodology of introducing policies in Nigeria. Sanusi is not alone; as this pattern of unilateral decisions that affect the citizens has become the norm in our country. Yet they say we operate a democracy.
One question I have at this point is; have the members of the House of Representatives who unanimously agreed with Sanusi gone back to their constituencies to discuss the issue? In a place where things are done properly, what is expected is for these House of Representative members to go and run local surgeries and discuss the policy with their constituents and bring feedback and discuss the issue in the house on whether Nigerians want the policy or not. Come to think of it, if a policy which was passed as an Act in 1991 has taken 20 years to be effected then something must be wrong with it.
Did the Central bank carry out any impact assessment of the proposed policy? If yes have they shared their findings publicly for people who are against the policy to see what has been done and agreed? What is the level of public consultation?
A simple impact assessment would have asked questions like why Islamic banking is necessary now and why is Central Bank intervention needed to bring it to fruition. What are the objectives and the intended effects of Islamic banking on the economy? What other options have been considered and the justification for this preferred option. Finally, is there a period of review and plan for future action so that if it does not achieve what it is intended to achieve, it could be done away with or modified. We know that policies in Nigeria are all scattered here and there and once a policy has been introduced nobody cares again as it will stay whether good or bad.
I understand Sanusi said Islamic banking is practiced in 74 countries of the world out of the 196 countries. However what he has failed to tell Nigerians is that the main centres for Islamic banking still tend to be concentrated in the Middle East and Gulf region.
It is true there are Muslims all over Nigeria, so this form of banking will need to be offered by most banks as it is done in the United Kingdom. However, there is only one bank which is solely an Islamic bank in the United Kingdom - the Islamic Bank of Britain and it has only seven branches. We know that Nigeria being what it is as of today, there will be many banks that will spring up. How will the Central bank vet the sources of finance for setting up these banks?
There is an estimated 70 million Muslims in the country who deserve to bank they way they like. But just like Sharia, have they asked for it? If they did; has it been discussed in our legislative houses? Central Bank may have a prerogative on the monetray policy of the country, but sensitive policies like this need to be adequately discussed and agreed in the interest of the unity of our dear country. I therefore wonder the rationale for CBN to spearhead the request to set up such banks. The CBN's role is to promote not force any policy on us.
Islamic banking is about creating wealth for the community so what has happened to all the community banks approved by the Central Bank of Nigeria before?
There was a Central Bank of Nigeria conference recently, but reports have it that the conference was meant to counter Christian opposition to the introduction of Islamic banking and not to convince them of the benefits.
Proponents say Islamic banks deliberately don't finance anything that is harmful to society as they only look for projects that make positive impact in people's lives. Though this is a good thing, how will CBN monitor this to stop funding of extremism?
Finally, I believe we should change our way of introducing policies in the country. We should have more consultations and get Nigerians onboard as part of decision making. Nigerians are now more alert to any policy that will impact on them. Many more vehement oppositions s are imminent if we don't do things the right way.