Islamic banking: Nigeria to benefit from $1.4trn assets

West African Institute for Financial and Economic Management (WAIFEM) says Nigeria stands to benefit from over $1.4trillion worth of assets being controlled by Islamic banks all over the world if the nation adopts the banking model.

The director general of WAIFEM, Prof. Akpan Ekpo, disclosed this in a chat with Sunday Business, at the opening ceremony of a regional course on econometric modelling and forecasting for policy analysis, organised by WAIFEM to enable policy makers in the country acquaint themselves with new forecasting techniques needed to develop the financial sector and the economy at large.

He explained that there are between 400 and 500 Islamic banks in the world controlling assets worth over $1.4trillion and that by the year 2020, these banks would have assets worth over $4.4trillion. “What is wrong with Nigeria being part of it to benefit from these incentives?

There are Islamic banks in Asia, Europe, America , Kenya , Sierra Leone and other countries. When fully implemented, Nigeria would also be part of the global Islamic system.

Also, the point is that Islamic banking technique is another product in the sector for people to choose from. People are free to make their choice on what they want. Nobody is forcing people to bank with the non-interest financial institutions”, he said.

“The N10billion capital requirement for a start is in order. It means CBN must have done its homework very well before arriving at N10billion for non-interest banks. There are many economic benefits of operating non-interest banking. For instance, most areas in the north are un-banked.

So, with this new initiative, the people in that region would now have access to banks, just like in the south where most areas are still un-banked.”

Reacting to question on religious sentiment concerning the name, he explained, “The guidelines in the Banking and Other Financial Institutions (BOFIA) Act duly passed into law by the National Assembly are very clear.

The provisions of the BOFIA Act 1991, as amended, Sections 9, 23 and 52, provided for the establishment of Islamic banking in the country. The Act shows that Islamic banks can not discriminate against non-Muslims.

Also, the BOFIA Act says that the regulator can not attach any religious sentiments or affiliation to the name. This is part of trying to allay fears on the non-Muslim Nigerians, because it is very sensitive.

My only hope is that other players in the financial sector should also come up with their ideas of having non-interest financial institutions to grow the economy in line with global trend”.

On the on-going reforms by the apex bank, he said, “CBN is carrying out the reforms because of the weak state of the banks. Banking is a conservation industry because it handles cash.

So, the regulator works ahead of those in operations. I was a member of CBN’s board and I believe so far, the current governor of CBN is doing his best”.

source : vanguardngr

Mauritius to open first Islamic bank

The palm-fringed island’s growing offshore financial sector pitches itself as a financial platform bridging Africa, the Indian sub-continent and Asia.

Mauritius is seeking to tap into the $1 trillion Islamic finance industry, and the central bank also plans to offer sharia-compliant short-term liquidity tools.

The Bank of Mauritius granted its first Islamic Banking licence in October 2009 to provide an alternative mode of financial intermediation to bank customers, central bank Governor Rundheersing Bheenick said.

“We expect the bank to be operational by the end of the first quarter of 2011,” Governor Bheenick wrote in his annual end-of-year letter to stakeholders.

Islamic banking is one of the world’s fastest growing financial sectors, with industry estimates putting annual growth at 15-20 per cent.

source : the telegraph

Nigeria bourse seeks foreign investors to boost economy

Plans to introduce Islamic instruments and bonds to attract investment

Nigeria’s stock exchange is seeking foreign investors as part of its plan to demutualise the bourse and introduce new products including Islamic investments, said Arunma Oteh, head of the nation’s securities regulator.

The Nigerian Stock Exchange is in the “early stages” of demutualisation and will probably hire a new chief executive officer by the end of this year, Oteh, director general of the country’s Securities and Exchange Commission, said in an interview in Bloomberg’s London office. The SEC fired the previous CEO on August 4.

The bourse will consider selling stakes to outside investors, including foreign exchange operators, Oteh said. Building markets for Islamic finance, corporate bonds and exchange-traded funds will help attract investment into sub-Saharan Africa’s second-largest economy and the fifth-largest source of US crude imports, she said.

Restoring confidence

“The role of the stock markets is particularly important as we seek to diversify our economy,” Oteh said.

“The marketplace has to be one that is world class. Allowing both international investors and local investors to look at the exchange as something they can invest in is important.”

Oteh, a former vice-president at the African Development Bank who became head of the securities regulator in January, is trying to restore investor confidence after the benchmark All-Share Index sank 65 per cent from December 2007 to the end of last year amid a banking crisis and reports of market abuses.

The All-Share gauge climbed 0.2 per cent to 24,277.14 yesterday, extending this year’s gain to 17 per cent, according to data compiled by Bloomberg.

The SEC removed Ndi Okereke-Onyiuke as the bourse’s CEO after “inadequate oversight of the exchange, ongoing litigation, allegations of financial mismanagement, governance challenges, and the inordinate delays” on a succession plan, the regulator said last month. Emmanuel Ekazoboh, a partner at Deloitte & Touche, was appointed as administrator.

New listings

The SEC plans to revoke some brokerages’ licenses, Oteh said at a press conference in Bloomberg’s London office on Sunday.

Nigerian Finance Minister Olusegun Aganga is targeting minimum economic growth of 10 per cent as the government improves power and transport capacity, he told reporters in London on Sunday.

The economy expanded by 7.4 per cent in the first half of the year, compared with 5.9 per cent in the same period last year, Aganga said.

The exchange is seeking to increase initial public offerings and Oteh said she expects new stock listings soon from companies in the energy and telecommunications industries.

Building a corporate bond market in Nigeria is a “priority,” Oteh said. Levels of benchmark interest rates, inflation and economic growth are “extremely supportive” for corporate bond issuance and a new tax law has made the debt more attractive for investors, Oteh said.

source : bloomberg

Nigeria: Deposit Insurance Corporation to Develop Insurance for Non-Interest Bank

Nigeria Deposit Insurance Corporation (NDIC) has said that it is developing a deposit insurance framework for the operation of non-interest (Islamic) banking in the country.

Central Bank of Nigeria (CBN) is also developing framework for the regulation of non-interest banking and Islamic financial institutions.

The proposed Islamic banking in Nigeria – Jaiz Bank – will commence operation before the end of this year, its Managing Director/CEO Mohammed Mustapha Bintube has said.

Islamic Finance Working Group of Nigeria visited NDIC, Securities and Exchange Commission (SEC) and Debt Management Office (DMO) yesterday in Abuja to work out modalities for the commencement of non-interest banking in the country.

Acting Managing Director of NDIC Ibrahim Umaru said the Corporation will work with the team for the speedy commencement of Islamic Finance in Nigeria.

//

“You need to have appropriate legal framework for it. You need to develop compliance. You need to educate consumers who would want to avail themselves on the opportunities of non-interest bank”, Umaru said.

Current operators of non-interest banking in Nigeria include the Standard IBTC, Bank PBH, Diamond bank and the proposed Jaiz Bank.

“All stakeholders are working together to make sure that non-interest bank or Islamic bank takes off successfully in Nigeria. We have challenges in policy framework, on capacity building and on customers orientation”, Jaiz’s MD said.

He said they are visiting regulators so that Islamic and non-interest banking can be strengthen in Nigeria to be able to compete favourably with other countries like Egypt and South Africa.

He said the reason why Jaiz Bank is slow in commencing operation is because there is no compliance instrument for Islamic finance or non-interest banking in Nigeria.

“The second reason why we have not started is that the share size of the capital was increased from N2 billion to N25 billion and therefore the level of risk has increased significantly and people did not want to take bigger risk on something that is new”, he said.

“All these obstacles are been taken care off and before the end of the year you would hear good news from CBN on the JAIZ operation”, Bintube said.

source : allafrica

Kenya sees potential of Islamic banking

Kenya is considering allowing Islamic financial products as the east African country tries to tap into funding from the Middle East.

The effort by the Central Bank of Kenya comes two years after the country licensed its first Islamic banks. Gulf African Bank, the first Islamic bank in the country, has found its niche and was looking to capitalise on the call for new financial products.

Islamic or Sharia-compliant banking is a fast-growing segment of the financial sector in Kenya. Its principles include banking without giving or receiving interest payments and investing in Muslim-friendly enterprises.

Gulf African Bank, partly owned by the Dubai equity company Istithmar World, and First Community Bank, Kenya’s other Islamic lender, control 1 per cent of the banking sector’s net assets after less than two years of operation.

“This is a testimony of the vast potential of Islamic finance in Kenya, which should be tapped,” said Njuguna Ndugu, the head of the central bank. “Opportunities should be explored in the insurance and capital market segments using Sharia-compliant vehicles.”

Mr Ndugu spoke this month at the second East and Central Africa Islamic Finance Conference in Nairobi. The central bank is clearing the way for the issue of Sharia-compliant bonds, known as sukuk. It is also exploring Islamic-based co-operative insurance or takaful.

Sudan Backs Central Bank of Nigeria On Non-Interest Banking

The monetary authority in Sudan has expressed its readiness to supportthe Central Bank of Nigeria (CBN) in implementing non- interest banking in the country.A statement by the CBN and signed by its Head of Corporate Communications, Mr Mohammed Abdulahi, stated that the support, which isfrom the Central Bank of Sudan (CBOS) would be through experience sharing and capacity building.

//


According to the statement, a CBN delegation led by the CBN Governor, Sanusi Lamido Sanusi , had visited the CBOS where the CBN Governor intimated officials of the CBOS on the on-going efforts to develop a regulatory and supervisory framework for non-interest banking inNigeria. The Advisor to the CBOS Governor on Non-interest Banking, Dr. Ahmad Ali Abdullah, assured the CBN of the readiness of the CBOS to support CBN in the implementation efforts.

Non-interest banking is provided for in Nigeria in Sections 9, 23 and52 of the Banks and other Financial Institution Act 1991 as amended. The visit to the CBOS coincided with the participation of the CBN delegation to the 16th Meeting of the Council of Islamic Financial Services Board (IFSB) in Khartoum, Sudan, this month. That was thesecond meeting attended by Nigeria since the CBN became a full member of the Council in January 2009.

//

//

The meeting was preceded by an international conference with the themes, the Changing Landscape ofIslamic Finance – Imminent Challenges and Future Directions andDeveloping Capacity Building to Enhance Financial Stability in theIslamic Financial Services Industry.

According to the CBN, the Council deliberated on several issuesincluding strengthening of Islamic financial system and approved inprinciple to establish an inter-governmental special purpose entity tohelp in building liquidity management infrastructure at both domesticand international levels.

“This is to be achieved by facilitating cross-border liquiditymanagement among Non-interest financial institutions through theacquisition and maintenance of global pool of sovereign assets,” CBN said.According to the Council, said the Nigerian apex bank, such sovereignassets must be suitable for use as underlying asset on which it wouldbenchmark the issuance of highly rated Islamic bonds to be tradedglobally.

“Other areas which the council deliberated and agreed upon include theissue of capacity building among the operators and regulatoryauthorities with a view to strengthening their operations and ensuringefficient service delivery in the industry.The CBN delegation to Sudan which comprised the Governor, MallamSanusi Lamido Sanusi; Deputy Governor, Financial System Stability, Dr.Kingsley Chiedu Moghalu; Director, Financial Policy and RegulationDepartment, Mr. ChrisChukwu and others returned to the country last week.

source : allafrica

‘Islamic Banking is the Answer’ for Nigeria’s economy

Islamic banking is the answer to Nigeria’s economy because it “promotes infrastructural development which Nigeria critically needs,” says Mrs. Hajara Adeola, the managing director and chief executive officer of Lotus Capital Limited.She said the establishment of Islamic financing in Nigeria is rife following the plan by the CBN to discontinue universal banking for specialised banks.

The Jaiz International Bank has not been able to take off due to the N25billion compulsory capitalisation benchmark for banks. She said it is possible to have Islamic banking with the CBN relaxing the capitalisation base for banks. She said banks categorisation will: “bring banks nearer to the people and offering specialised service. Not all banks are international banks everywhere in the world” she said. Adeola spoke yesterday at the five-day training workshop on Islamic finance and investment products put together by Chartered Institute of Bankers of Nigeria (CIBN) and Lotus Capital Limited.

source : allafrica

Kenya: CBK Targets Gulf Cash with Sharia Compliant Bonds

The Central Bank is working on a framework that will eventually lead to the flotation of sharia – compliant bonds and treasury bills in the local money market.

The move to entrench Sukuk bonds and bills in the law is seen as a push by CBK to tap the increasing amount of cash flowing into Africa from the Gulf region.

Sukuk — bonds that are structured to be in compliance with Shariah law which bars payment of interest — have seen rapid uptake in recent years as more and more businesses and governments have used them to raise financing.

They has a maturity that is determined in advance and is backed by an asset which makes it possible for the investor to earn a return from the profits derived from the assets.

Much of this activity has taken place in the Gulf and South East Asia so far, and analysts believe a government issue could be the key that Kenya needs to place it as the premier Islamic finance hub in the region.

“We’re are still waiting for the structured Sukuk to cover bonds and the Treasury bills market,” says Alex Nandi – deputy director banking supervision at the CBK.

Plans for a framework to oversee the flotation of Sukuks come two years after the licensing of the first Islamic banks in Kenya.

Gulf African Bank and First Community Bank are still finding their footing in the Kenyan banking sector and are on course to turning profitable two years into operations.

But unlike conventional banks which are able to trade in bonds and treasury bills, Sharia law has constrained income avenues for Islamic banks.

With the flotation of Sukuk bonds, Islamic banks will have an investment avenue to generate income from the new form of government securities.

Infrastructure bond

Gulf African Bank for instance invested Sh500 million in the sukuk portion of a government infrastructure bond issue last year and received a 13.5 per cent rate of return.

In 2009 the bank earned Sh56.6 million from its investment in government securities compared to no income from government securities in 2008.

The banks are also benefiting from cash flowing from the Middle East into investment projects in the country.

Sovereign funds in Gulf States, flush with cash are eyeing African countries as lucrative investment zones and most of this cash is handled by these institutions.

“There is a huge appetite by business people from the Gulf region to invest in Africa,” says Suleiman Shahbal, the chairman of Gulf African Bank.

Since the break-out of the global economic crisis which took it’s toll on conventional banking, Islamic banking and financing has enjoyed a growing popularity.

Touted as the answer to conventional banking whose risky practices have come under the spotlight since the start of global financial crisis back in 2008, it presented an attractive alternative.

Last year, global issuance of Sharia – compliant bonds and loans grew 40 per cent in the first 10 months of 2009 compared to the same period a year ago, as reported by the New York Times.

The total amount of Sharia – compliant debt outstanding is estimated at about $1 trillion, up from $700 billion just two years ago.

Still, Sukuk issues were not spared the snowball effect of the global financial crisis that hit conventional banks.

Sukuk issues fell from $25 billion in 2007 to $15 billion last year.

Jawal Ali a managing partner at law firm King and Spalding’s Middle East office says that by 2008, up to 85 per cent of Sukuks issued were not considered Shariah compliant.

But the Dubai Debt crisis early this year did nothing to firm-up the credibility of Islamic financing as a bright spotlight was cast on Sukuks.

About 10 per cent of the Dubai’s $80 billion debt load is estimated to comply with Shariah, casting the spotlight on the credibility pedestal Islamic financing has ridden on over the years.

Underlying assets

A key problem was a collapse in value of underlying assets – primarily real estate investments – which back Sukuk issues.

Islamic bonds are structured as profit-sharing or rental agreements, and their returns are derived from underlying physical assets such as real estate or commodities.

Unlike conventional banking which has a vast array of investment options, Islamic banks are heavily concentrated in real estate placing them at high risk should property values fall as they did during the financial crisis.

But as the global economy limps out of the recession and the choke-hold on credit eases, Islamic financing is expected to gain traction this year.

“There is a lot of market activity and there might be a pick up this year,” says Mr Ali.

source : allafrica

Nigeria inches closer to establishing Islamic banking model

 

The Governor of the Central Bank of Nigeria, Mr. Lamido Sanusi’s initiative to establish an Islamic banking model in the country is getting closer to reality. To foreclose any doubt and capitulation to varied criticisms against the proposal, the apex bank‘s helmsman led a delegation from the CBN to the 16th Meeting of the Council of Islamic Financial Services Board in Khartoum, Sudan recently.

The meeting, the second attended by Nigeria since the CBN became a full member of the council in 2009, serves as a tonic for the regulator to reaffirm its commitment towards establishing the model of banking operated according to the dictates of Sharia law.

Sanusi, who has never hidden his passion for the non-interest banking paradigm, is of the opinion that the prevailing economic meltdown has increased the demand for Islamic financial products and services across the world.

His belief stems from the perception that while the recent economic meltdown lasted, Islamic institutions displayed strong resilience reflecting their conservative approach to business, balanced and ordered appetite for growth and focus on the basis of financial intermediation as opposed to innovation.

At the Khartoum gathering, Sanusi intimated the leadership of the Central Bank of Sudan of the ongoing efforts by the CBN to develop a regulatory and supervisory framework for non-interest banking and solicited the support and cooperation of the mainly Islamic country‘s banking regulator in that regard.

As expected, he got a positive response from the Advisor to the Governor of the CBS, Dr. Ahmad Ali Abdullah, who represented the Governor.

He was assured of the readiness of the banking regulatory authorities in Sudan to support the CBN in its implementation efforts through experience sharing and capacity building.

During the meeting, the council deliberated on several issues including strengthening of Islamic financial system and approved in principle to establish an inter-governmental special purpose entity to help in building liquidity management infrastructure at both domestic and international levels.

The CBN, in an e-mailed statement to our correspondent on Friday, said, ”Establishing the special purpose entity would be achieved by facilitating cross-border liquidity management among non-interest financial institutions through the acquisition and maintenance of global pool of sovereign assets.”

According to the council, such sovereign assets must be suitable for use as underlying asset on which it would benchmark the issuance of highly rated Islamic bonds to be traded globally.

Other areas which the council deliberated and agreed upon include the issue of capacity building among the operators and regulatory authorities with a view to strengthening their operations and ensuring efficient service delivery in the industry.

Sanusi believes that the global financial crisis exposed the deficiencies in the conventional banking system and damaged the confidence in the global governance system.

The CBN boss had said in an earlier gathering that he initiated actions to develop a regulatory and supervisory framework for Islamic banking in Nigeria in recognition of its benefits in a growing economy like Nigeria.

To realise the non-interest banking model, the CBN intends to deploy a number of strategies to address some of the identified challenges,

These include extensive capacity building through collaboration among the various stakeholders to develop cognate expertise in non-interest banking, development of an adequate regulatory and supervisory framework for the effective operation of non-interest banking in Nigeria, promotion of greater cooperation and coordination among relevant regulators and other stakeholders such as the Securities and Exchange Commission and the Nigerian Stock Exchange, the National Insurance Commission, the Nigeria Accounting Standards Board, among others.

source : the punch

First Islamic Microfinance Bank Launched in Lagos

The first Islamic micro finance bank in the country, Al-Barakah Micofinance Bank was yesterday commissioned in Lagos.

The bank is an initiative of The Muslim Congress which spans 16 years.

At a well attended event, the Chairman of Al-Barakah MicroFinance Bank, Dr.Abdul Hakeem Mobolaji said the bank is set up in response to the increasing demand for alternative micro credit products by the less privileged members of the society against the conventional banking practices.

He also said the bank would provide succour and financial service to the society in support of the Federal government’s drive to eliminate poverty in the country.

“What we are commissioning today represents our contribution towards providing an alternative banking for Muslims and non-muslims alike.

It is our fervent hope that more like-minded individuals and corporate body will embrace this window and deepen the financial market through provision of sophisticated Islamic instruments and finance”.

source : allafrica