In this exclusive interview with BusinessDay, Muhammad Nurul Islam, managing director/chief executive officer, Jaiz Bank plc, told Bashir IBRAHIM HASSAN and YANGE IKYAA that wholesale transparency in the bank’s regular operations at all levels has enabled it to move away from huge losses to break-even point in record time. Excerpts:
Q:We have met and interviewed previous managing directors of Jaiz Bank, we are however meeting you for the first time, please tell us about you and what the Bank is currently doing or planning to do in the future.
Thank you very much. Jaiz Bank plans to be the dominant financial institution in the country. Actually, if I have to say anything about myself, I would say that my interest of joining Islamic banking was aroused when I attended an international seminar on Islamic banking and insurance in my own country, Bangladesh.
God accepted my prayer on the 30th of March, 1983, when the Islamic Bank of Bangladesh started operations and I joined the Bank on its very first day of operations.
While joining the bank, people had a lot of skepticism about its system of operations. Many of my friends and colleagues told me that the system will never succeed.
However, within a period of five years, that Bank became one of the leading banks in Bangladesh. Today, it is the largest bank in Bangladesh, with 293 branches and by the end of December, 2014 it will add up to 294 branches.
We have more than 550 billion Taka deposits, which is an equivalent of about N1.1trn, and this is the largest bank in terms of deposits in the entire Bangladeshi banking industry.
The Islami Bank of Bangladesh was initiated by the Islamic Development Bank (IBD) and based on the same initiative when the entrepreneurs of Jaiz International Bank (The SPV) set up to ensure the take-off of Jaiz Bank plc they approached IDB on their intention of setting up a similar bank in Nigeria, IDB advised them to go to Bangladesh to visit the Islami Bank of Bangladesh, as this is the most successful Islamic bank in the whole world and a possible, role model of Islamic banking and finance.
They were asked to do a technical evaluation of the Islami Bank of Bangladesh with a view to getting some technical expertise/advise for Jaiz. It is against this backdrop that I and a few of my colleagues were brought in to provide support for Jaiz Bank.
And we had the opportunity to exchange views with the directors and senior staff of Jaiz Bank in Bangladesh culminating in the signing of an MoU and a technical partnership in the positions of managing director, Head, IT, Head, Training and Chief Risk Officer.
I came in November, 2013 and my impression is that the success which we have recorded at the Islami Bank of Bangladesh is the same thing we will achieve with Jaiz Bank in Nigeria.
So, can you tell us what you did that enabled you to achieve that kind of success with the Islami Bank in your country?
You have asked me the same question that many people have asked me in Bangladesh. And I have to say that number one factor is, transparency, equity, fairness and justice in our operational principles and of course, strong commitment to the socio-economic welfare of humanity in general.
We worked hard with hundred percent transparency. If you say transparency, it is transparency in two areas: the recruitment of manpower and investments.
We decided and agreed among the directors that no investment should be deployed without merit and that no employment should be conducted without due process. These two things, I say to everybody, helped the bank to become the largest and leading bank in the whole country and the whole Islamic banking industry.
When I talk about these things, I become a little bit emotional because with my own eyes, I have seen that the people I have worked for, that is the Islami Bank of Bangladesh, we are not that much efficient in comparison with our fellow competitors but one thing is that we were hundred percent transparent.
We resisted corruption from the lowest cadre of staff to senior management, Board of Directors of the bank; in terms of employment process, procurement, or deployment of funds for investment purposes.
Today, IBBL does not have only a banking system; it has developed a socio-economic system, through its foundation, and these two complementary groups have made it to become a bank of choice for most of the people.
The remittance inflow from the non-interest banking into Bangladesh annually is nearly $14bn, and of the over 15 banks in Bangladesh, the Islami Bank of Bangladesh nearly 30 percent of the whole currency inflow every year, comes through IBBL. Its customer base is in excess of 10 million.
Now, with your vast knowledge and experience in the Islamic banking system and successes recorded by you, what changes and new developments have you been able to bring to bear on Jaiz Bank in Nigeria?
Thank you very much once again. Let me give you one short and very visible example. The month in which I joined this bank (November, 2013), the operating loss of that month was around N100 million.
Today, I can confidently tell you that we have moved from a negative to a positive position. The results are currently being audited and we will publish as soon as our accounts are approved by the regulatory authorities.
We have also made progress in our branch roll-out initiatives. Today, we have 15 branches spread across our area of operations with more pencilled to be opened soon. We have also submitted our application for a national license to the CBN. This will enable us when approved to operate in all the states of the federation.
Nothing good comes without challenges, so here in the Nigerian environment, what challenges do you think are militating against your operations and how do you intend to overcome them?
Thank you very much. Here in Nigeria, my first challenge is communication. Being an Asian, my accent of English is not that much clear to the Nigerian people, but I am managing it. The other challenge which I see is generic and it is common with each and every new and growing institution.
When I joined the bank, I discovered that there is no compliance mechanism for deploying our excess liquidity, but we are consulting with CBN in this regard. This is a huge challenge, as we don’t have today, a liquidity management instrument that is non-interest banking compliant to manage our excess liquidity. We hope to overcome it just as we did in Bangladesh.
As the Managing Director of Jaiz Bank, tell us, from the very beginning to date, what can you proudly refer to as the achievements of Jaiz Bank in Nigeria?
First of all, I congratulate the shareholders, I congratulate the depositors, I congratulate my colleagues at the bank for their untiring spirit. The concept is totally new to Nigeria but they are trying their best to make it successful and it will succeed God’s willing because the potentials are enormous.
Worthy of note is the fact that non-interest Islamic banking system is not just for profit only, but rather the underlining objective is to ensure socio-economic welfare for all humanity irrespective of race or religion.
If you cannot bring positive change in the lives of people around you through your activities, then, you are not practising Islamic banking; you are not practising non-interest financial banking.
The core concept and very foundation of Islamic banking is to render all forms of financial services, complying with Islamic Sharia, but the basic target is to enhance the welfare of humanity. This is my message to my colleagues everywhere I go and to the public in general.
To exemplify this, we have spent a huge amount of money in setting up Insurgency Victims Support Programme aimed at alleviating the sufferings of the victims. We have also set up the Jaiz Foundation to serve as a platform for our social responsibility initiatives.
So, in terms of development during my journey at Jaiz, I have given more and more attention to the enhancement and expansion of our IT platforms so that we can render service by, by-passing the brick and mortar of regular office spaces to reach distant and remote customers and prospects.
In the first quarter of 2015, we will start our mobile banking services. I think if we achieve this target, we will be accelerating the realisation of the CBN financial inclusion policy.
Generally, looking at the Nigerian environment and the entire banking industry, what are the prospects of this Islamic banking in Nigeria?
Thank you very much. Actually, if you compare Bangladesh and Nigeria, both countries have got many similarities, except that Nigeria is a bigger country compared to Bangladesh, but environment wise, they are similar.
We were a corrupt country known all over the world and we had no developed industry until the Islami Bank of Bangladesh came into operation. We had power problems in Bangladesh the way Nigeria is having it today, but we are taking the lead initiative to finance business activities in various industries.
Back in 1982, nobody thought that we were going to have a vibrant industry, but today, a number of industries, more than 5,000 are employing nearly 5 million people, out of which nearly 60 percent are financed by the Islami Bank of Bangladesh.
We have financing commitments in various developmental project in diverse sectors worth $24bn and, from that experience, I can tell you that whatever gloomy picture you may see about Islamic banking in Nigeria, it will grow to become very successful.
Just last week, we had a Banker’s Committee Retreat in Calabar and in that meeting, there was a presentation from three respected ministers in Nigeria, namely agriculture, power and industry. And all of them, from their presentations, declared that the Nigerian Industrial Revolution Plan they have formulated, if implemented, can create limitless opportunities for banking businesses.
The agriculture minister has already planned massively for that, and I think there can be a big change and we hope to collaborate with the government through the various agencies for taking this country forward.
It will not be achieved within one or two years’ time, hopefully, the path followed in Bangladesh, if followed in Nigeria, I think in a few years to come, Jaiz Bank will be a leading bank in providing finance to the industrial sector, finance to the power sector, finance to the housing sector, and also the agricultural sector.
Let me give you the example, in 17 years, from 1982 to 2000, the Islami Bank of Bangladesh could mobilise deposits to the tune of 30 billion taka (N60bn). Here in Nigeria, we have generated more than N30bn in three years, so don’t you think that the growth rate here is more than three times that of Bangladesh?
What can you say is the total contribution of Islamic banking to the global economy?
Thank you very much for this question. From the global perspective, the whole age of Islamic banking is not more than five decades; it is now running to five decades.
During this short period, the Islamic banking industry size has gone up to $2trn, and in more than 75 countries, nearly 600 Islamic banking institutions are in operation.
And the most important thing is that countries like the UK, countries like Singapore, countries like France, Hong Kong, they are trying their best to make each and every of their cities the centre of excellence for Islamic banking. They have realised the opportunities of Islamic banking.
If you compare the growth in the Islamic banking industry with the conventional commercial banking industry, you will see that Islamic banking is growing at about 16 to 20 percent per annum as against the commercial banking growth rate of between 5 to 7 and maximum of 10 percent per annum. So the Islamic banking industry is gradually taking market share from the commercial banking industry.
In the next three to five decades, Islamic banking will become a mainstream banking industry in the whole world, and particularly in the developing countries, there are tremendous opportunities because the industry is based on real transactions, real asset backed investments.
People were happy when this Islamic banking came into Nigeria, but Jaiz Bank remains the only Islamic bank in the country till date. Why are other Islamic banks not springing up?
This is a generic issue. In Bangladesh, we were the pioneer in 1983 and by 1987, another bank called Al-baraka joined. By 1995, other two banks came, one of them being the Social Islamic Bank, and now all the commercial banks are having Islamic banking windows and two of the commercial banks have totally converted to Islamic banks. Even two public sector banks in the country have now got an Islamic banking window. Now, there are nine Islamic banks out of a total of 58 banks in Bangladesh.
What I am telling you is that this thing is a gradual process. And I tell you that transparency is very important in today’s economic transactions, especially in a country like Nigeria.
So, what exactly are your plans for this bank, what is your vision and what should we expect to see in the next five years?
I did say to my shareholders that by September 2014, we will break even and from 2015, we shall wipe out the loss incurred for 2012 and 2013 and by 2016 end, we will declare dividend.
By 2016 end, we will have improved capital to enable us go outside the shores of Nigeria. So in the next five years, you will see Jaiz Bank going International and expanding its business base. People will say that from an ordinary regional bank, it has gone national and international. God’s willing. This is my vision for Jaiz Bank plc.
What is your final word about banking in the Nigerian economy?
Actually, I forgot one thing, the one vision we have is that Islamic banking is non-partisan. The way the sun shines on every human being, irrespective of who believes in its creation and who does not, that is the same manner in which Islamic banking is run for the well-being of humanity, irrespective of colour, creed, religion and so on and so forth. It is a bank for everybody.
Jaiz is the Bank for all Nigerians. We have both Christians, Muslims employees and customers and we are calling on others to be part of us.