Assets of non-interest banks and their windows stood at ₦186.46 billion as at June 2019, growing modestly from ₦66.96 billion in 2015, according to latest numbers from the Nigeria Deposit Insurance Corporation (NDIC).
But share of their total assets against those of the banking industry stood at a paltry 0.49%. Total deposits were reported at ₦121.68 billion, or 0.53% of the industry total during the same period while financing stood at ₦59.81 billion, 0.38% of the industry total- indicating a clear insignificant impact of such performance.
Umaru Ibrahim, NDIC Managing Director, who announced the figures on Thursday said there was huge opportunity for additional expansion, eventhough there are threats.
According to him, “Emerging risks facing Islamic banks now, and beyond 2019, appear to stem from underlying structural economic weaknesses, inflationary trends and depreciating currencies- all the developments that could potentially destabilise liquidity, raise non performing financing and erode capital.”
He was quoting an Islamic Financial Services Board (IFSB) 2019 Stability Report during the Sustainable Islamic Finance Conference in Abuja.
The conference tried to unearth factors militating against the seamless operations of the Non-Interest banking sector in Nigeria in order to enable it effectively discharge its responsibilities which include, wealth creation, poverty reduction and job creation.
Ibrahim said foreign currency risks also remain a significant concern for regulators and Islamic banks alike.
“Equally, there exist structural challenges around Liquidity management and legal accommodation in terms of existence and mechanisms for dispute resolution,” Ibrahim added.
Since Nigeria introduced non-Interest banking in 2012, the country has witnessed the establishment of JAIZ Bank, Windows of Stanbic IBTC and Sterling and Islamic Micro-finance banks.
“Whilst we express our regret on the closure of Stanbic IBTC Islamic banking window, we welcome the establishment of TAJ bank and hope more of such will follow,” he added.
Ibrahim said Nigeria could leverage Islamic financing to expand financial access to the underserved, particularly as EFINA Access to Financial Services in Nigeria Survey 2018 data, indicate 36.6 million adults representing 36.8% of 99.6 million Adult -population are financially excluded. Of particular concern is the 62% of the 23 million adults in the North West and 55% of 12 million adults in the North East who are financially excluded.
“Based on the aforementioned scenario and the prospects therein, we wish to seize this opportunity to call on investors to invest in the establishment of non-interest deposit money banks and non-interest m microfinance banks to take care of this underserved segment of the population,” he urged.
Hassan Usman, Managing Director of Jaiz Bank, speaking on the sidelines of the conference said regulators would need to define a clear path of growth for the non-interest banking.
He said, “Islamic finance in Nigeria started in 2012 in terms of banking and there were expectations in terms of infrastructure and enabling environment. That has not seen proper traction and I suspect that might be some of the challenges discouraging investors in this sub-sector.
He said for instance, until 2017, there were no instruments at all for Islamic banks to invest or manage their liquidity.
Usman explained that Islamic banking provides options of contract that are not interest based and are ethical in nature and that leads to partnering.
“What we try to do is commit to providing financial services to our customers in a way that will engender win-win situations. We trade, we partner and we provide financial support generally.”
Onyinye Nwachukwu, Abuja
