PI ONEERI NG I SLAMI C BANKI NG I N NI GERI A THE PROPOSED JAI Z - - PowerPoint PPT Presentation

PI ONEERI NG I SLAMI C BANKI NG I N NI GERI A THE PROPOSED JAI Z BANK STORY BY

• M. MUSTAPHA BI NTUBE

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Outline Outline

• 1. Introduction to Islamic Banking
• 2. Opportunities for Islamic Banking in Nigeria
• 3. JAIZ’S Pioneering Role
• 4. Challenges of A Pioneer
• 5. Benefits of Islamic Banking
• 6. Conclusion

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1

Introduction to Islamic Banking Introduction to Islamic Banking

Introduction to Islamic Banking Introduction to Islamic Banking

Concept and Principles

Although I.B. originates from Islamic religion, it has become a global practice open to all.

Islamic Banking & Finance

Qur’an

Juristic Interpre- tations

Hadith

M oral/ Ethics

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Introduction to Islamic Banking Introduction to Islamic Banking

Concept and Principles

Bible:

“ Do not charge your brother money or food or anything else that may earn interest” Deuteronomy 23 verse 19 “ He who lends money without usury and does not accept bribe against the innocent shall never be shaken” Psalms 15 verse 5

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Introduction to Islamic Banking Introduction to Islamic Banking

Concept and Principles

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Opportunities for Islamic Opportunities for Islamic Banking in Nigeria Banking in Nigeria

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Opportunities for Islamic Banking in Nigeria Opportunities for Islamic Banking in Nigeria Rationale for Islamic Banking in Nigeria

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Increasing Disp Income Innovation Expanding Cap M kt Activities Restricted Access to Credit Large Informal Sector Large M uslim Pop Increasing Global Acceptn FX Direct Investment Rationale for Islamic Banking in Nigeria

Opportunities for Islamic Banking in Nigeria Opportunities for Islamic Banking in Nigeria Analysis of Potential Demand (Cntd.)

 Estimated Islamic Banking M arket Size is N4.35

trillion, representing 44% of total industry deposit liabilities (N9.9Trillion) as at Dec 2008.

Estimate is based on distribution of deposits in some

leading Nigerian Banks (by KPM G).

Deposits are expected to grow at a CAGR of 25% for

the next five years.

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JAIZ’S Pioneering Role 3

J AIZ’S Pioneering Role

Raised Required Cap. Of N2 b in 2003; Applied for licence M arch 2004; New Cap of N25 b introduced July 2004; Back to the trenches:

• Private Placement;
• International Road Shows- Cap + Str. Partner;
• Legal & Regulatory Framework;
• Continuous awareness creation.

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J AIZ’S Pioneering Role

Key Issues to be addressed:

• Complete Capital Raising;
• Obtain final licence
• Sign on Strategic/ Technical Partner;
• Recruitment & Training;
• Infrastructure acquisition
• Promotion
• Roll Out

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4 Challenges Challenges

Challenges Of Estb. Islamic Banking in Nig

No Regulatory/ Supervisory Framework Size of capital required

• N25 billion set up by regulatory fiat
• Serious barrier to entry
• Sub-optimal utilization of capital
• Weak KPIs – initial years

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Challenges Of Estb. Islamic Banking in Nig

Fiscal Issues

• Nature of IB Products
• Need for tax neutrality (FIRS/ M oF)
• Lack of sufficient Political support

Lack of Liquidity M gt. Instruments

• 25% Liquidity Ratio
• Interim measures required for IB

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Challenges Of Estb. Islamic Banking in Nig

Knowledge Gap

• Trained manpower;
• Lack of training facilities;
• Lack of sufficient understanding of IB
• Regulators
• Operators
• General Public
• M isinformation / skewed understanding

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5 Benefits of Islamic Banking Benefits of Islamic Banking

Benefits of Islamic Banking

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Access to Credit Emphasis on Socially Responsible Investments Emphasis on Ethical/ M oral Values Emphasis on Trust Diversification Research and Development Ability to tap into The Retail M arket Risk/ Profit Sharing

Benefits of Islamic Banking

To the Society

To Banking

Benefits of Islamic Banking

Diversification & Deepening the market; Reducing the size of the unbanked; Skill acquisition; New sources of international capital flow; Improves regional competitiveness;

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Conclusion Conclusion 6

Conclusion Conclusion

Islamic Banking is very profitable; Nigeria should not be left out of this growing

global phenomenon;

Islamic Banking can empower our people by

bringing in the informal sectors;

In line with CBN’s FSS 202020. We need the cooperation of all

stakeholders,esp the Regulators, for all of us to benefit from Islamic Banking

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THANK YOU THANK YOU