Islamization of Nigeria: CBN Defends Islamic Banking

Posted by admin CBN (Central Bank of Nigeria), Latest Politics, National Politics, Top Stories Wednesday, June 22nd, 2011

The Central Bank of Nigeria (CBN) has defended the introduction of Islamic banking model in the country, saying that it is obliged, by law, to issue licences to appropriate entities for the establishment of non-interest banking (NIBs) provided they meet the regulatory requirements for licences.

Deputy governor (financial system stability) Dr. Kingsley Moghalu, who made this submission in Lagos at a seminar entitled “Re-purposing Capital: Non-Interest Banking in Nigeria”, yesterday said the NIBs would exist side by side the conventional banks.

He said that non-interest banks under Islamic banking would address the major reasons why some people were staying away from depositing money in banks, adding that this would help the NIBs play significant roles in the economy.

Moghalu further said that there was no need for members of the public to entertain fears over the establishment of Islamic banking as the CBN would pursue financial inclusion.

He said that, under the new banking model as defined under the Banks and Other Financial Institutions Act (BOFIA) 1991 as amended, the CBN categorised banks into commercial, merchant and specialised banking, adding that NIBs, microfinance banks and development banks fall under specialised banks.

Moghalu further clarified that Islamic banking was not the only type of non-interest banking contemplated under the new banking model which categorised non-interest banks as part of specialised institutions, adding that the CBN recognised that Islamic banking was a form of non-interest banking and that there were other forms of non-interest banking than Islamic banking.

He said that the non-interest banking and finance models are categorised into two: non-interest banking and finance based on Islamic commercial jurisprudence, and non-interest banking and finance based on any other established non-interest principle; but the amended guideline released recently governs the provision of Islamic financial services.

Moghalu stated that the CBN would subsequently issue guidelines governing the provision of non-interest financial services based on established principles other than Islamic finance.

He said that there was no discrimination in terms of operating NIBs, stressing that nobody would be barred from participating in NIBs.

“From the view of the CBN, we are pursuing banking and finance and not discrimination. CBN is not making laws but laws empower it to regulate the banks in the country,” he added.

He said that the apex bank was working hard to see that “there is a fair playing ground” for people who want to participate in the non-interest banking.

The apex bank further said that in line with its objective of promoting financial inclusion in Nigeria, individuals and groups wishing to practise non-interest banking based on established rules and principles other than Islamic may apply for a licence to operate such institutions and the CBN will accordingly issue guidelines pertinent to that type of banking.wp_posts