March 2011
REVIEW OF ISLAMIC FINANCE INDUSTRY
The Central Bank of Nigeria was able to come up with new
frameworks that include the guidelines for non-interest
banking which is same as Islamic finance banking.
Conventional banks and other financial institutions can
offer or sell Sharia-compliant products and services
through subsidiaries or branches. The guidelines covers
banks or subsidiary, microfinance banks or subsidiary,
development finance institutions, primary mortgage
institutions and finance companies registered to offer
such services.
Given the increasing number of request from persons,
banks and other financial institutions desiring to offer Sharia compliant products and services in Nigeria, the
CBN has developed the framework on non-interest banking
and other financial services, it said.
The Central bank added that such non interest financial
institutions are required to establish a Sharia Advisory
body as part of their governance structure to be known
as “Sharia Advisory Committee” (SAC), which shall
operate as an independent body, with the principles of
competence, confidentiality and consistency properly
enshrined in its operations.
“It is expected that an independent SAC will command
public confidence, herby promoting the growth and
development of the industry,” it added.
Non interest financial institutions refer to banks or
other financial institutions under the purview of the
CBN which transact businesses, engage in trading,
investment and commercial activities as well as
provision of financial products and services, in
accordance with Sharia principles and rules of Islamic
commercial jurisprudence.
Transactions, instruments and contracts under this type
of services are non-permissible if they involve
interest, uncertainty or ambiguity relating to the
subject matter, terms or conditions gambling,
speculation and unjust enrichment and exploitation or
unfair trade practices, the circular said further.
“Other non-permissible transactions include dealing in
pork, alcohol, arms and ammunition, pornography and
other transactions, products, good s or services which
are not compliant with Sharia rules and principles,” the
circular added.
There has been mixed impression about the pace of
Islamic banking in Nigeria. However, the country has not
been able to tap into the global Islamic funds market
currently valued at $750 billion, and is expected to
grow exponentially every year.
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