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Hamid Joda: Spurring financial inclusion through non-interest banking

With over 20 years of banking experience covering Treasury, Business Development, Consumer/retail Banking, Branch Banking and the Public Sector, Hamid Joda, founder/ chief operating officer of TAJBANK Limited, a new non-interest bank in Nigeria is one of the industry leaders working to make inclusive financial inclusion a reality in Nigeria.

Joda, an MBA graduate from Bayero University, Kano began his career at Niger Insurance plc in 1999 before moving to City Express Bank Limited, Lagos, where he held the position of Senior Supervisor. He also worked at Continental Trust Bank Limited, Kano, as a Senior Analyst and at the defunct Oceanic Bank International Nigeria Limited.

He was the pioneer Branch Manager of Fidelity Bank plc, Kano, from where he rose to the position of Area Manager in charge of the North East.

With a BSC in Business Administration (Banking & Finance) from the University of Maiduguri Joda’s extensive experience led him to First Inland Bank (Finbank plc) Abuja, as Group Head Retail Banking (North), where he later rose to become the Divisional Head, Retail Banking of the bank. He was also the Divisional Head, Public Sector, First City Monument Bank (FCMB) Limited.

Joda, a member of the Chartered Institute of Banking of Nigeria (CIBN), led a team that realised the vision of setting-up the second non-interest bank in Nigeria. Under his leadership, TAJBANK since receiving its regional licence from the Central Bank of Nigeria (CBN) on July 12, 2019 has been working towards achieving its vision of being ranked among the top ten banks in Nigeria by the year 2025.

With core values that include, trust and justice, customer-centric, excellence, determination, and innovation TAJBANK has a mission to build a sustainable, ethical brand through exceptional service and professionalism while enhancing stakeholders’ value..

As one of the measures to give affordable financial services to Nigerians who are either financially excluded or underserved, TAJBANK partnered with Smart Save Integrated Technologies Limited to allow people save money from even earnings that could be considered ‘little’ towards achieving a target.

According to the World Bank, access to a basic savings account is the first step toward achieving financial inclusion.

Aimed at reducing Nigeria’s financial exclusion rate, especially in northern Nigeria, TAJBANK said it saw an opportunity in the partnership as it will allow customers to seamlessly be onboard and benefit from the available financial services.

The digital savings platform which is in form of piggy bank will have its funds warehoused with a commercial bank while all transactions are processed and secured by Paystack, a Central Bank licensed payment processing company on behalf of Saveme.ng.

With a regional licence that enables the lender to cover the North East and North West regions of Nigeria and a headquarters in Abuja, TAJBANK plans to raise more capital and qualify for a National License in less than two years of operation.

But for now, the bank is focusing less on brick and mortar branches while investing more in Information Technology thereby reaching out to and serving its customers through robust IT tools, as it believes that is where the future of banking is headed.

TAJBANK has a unique product called the Wakalah where the Bank acts as an agent on behalf of its client to execute whatever legitimate mandate the customer may give the bank. This product is unique to non-interest banks only.

Furthermore, on the deposit side, it has the Mudarabah or partnership term deposit where customers place their funds with the bank while they use the deposit and share profit with customers based on a pre-agreed sharing ratio. It also has the Qard account, which is a current account relationship that attracts zero account maintenance charges.

As a non- interest bank, TAJBANK said it is guided by ethical principles; which include restrictions on areas it can finance. For instance, it said the bank cannot finance arms and ammunition and other areas considered harmful to society.

With more players expected in Nigeria’s growing non-interest banking, coupled with increasing asset size Joda said he is confident that in the next 5 years noninterest banking assets will be within the 5-10 percent range in

Nigeria. In Malaysia, non-interest assets are almost 30percent of the banking industry.

Globally, Islamic banking is growing at more than 7 percent and even European countries like the United Kingdom have embraced this model of banking owing to its benefits to society. The successful Sukuk issuances by the Federal Government also increased awareness about the sector and put Nigeria on the map. The future of the industry is very bright, according to views of industry experts.

Islamic banks are moneymaking financial intermediaries much like conventional banks, but in order to meet the requirements of Islamic law (Shariah), they must adhere to four major principles.

A prohibition on charging interest is the primary difference between Islamic banks and conventional banks, derived from the notion that charging interest is a form of exploitation and inherently inconsistent with Islamic values of fairness; Islamic banks are also prohibited from speculation, in the form of risky or uncertain business ventures, and from financing haram activities.

Studies have also shown that Islamic banks are compelled to donate part of their profits to benefit society in the form of zakat. Islamic banking and finance have emerged in recent years as an alternative, effective and viable tool for providing financial services and development worldwide, including non-muslim countries, as noted in findings of an industry survey.

According to the World Bank, there is solid evidence that Islamic finance has become an integral part of the global financial system and has the potentials of solving the problem of poverty and low economic growth through financial inclusion especially in poor income countries.

Financial inclusion through providing access to financial services according to the lender will stimulate the independence and self-development of poor households and micro-enterprises, and thus, providing easy access to finance is considered a giant step in connecting the poor section of the society to a larger and broader world.

Available statistics by World Bank suggests that there has been substantial progress in increasing financial inclusion in the world for about 62 percent of adults were financially included in 2014 compared to 51 percent in 2011.

Nonetheless, World Bank’s 2017 reports that about 2 billion adults were financially excluded in 2014 and 17 percent of them were from Sub-saharan Africa (SSA).

Again, five percent of the financially excluded adults cited religious reasons or beliefs as their justification for financial exclusion and the majority of these adults are expected to be Muslims, the report read.

According to the World Bank, the rate of financial exclusion due to religious reason is even higher in SSA at 6.8 percent and as such in view of this scenario, the Islamic system of Banking and finance could be very effective in enhancing financial inclusion, especially in Muslim dominated countries.

“The introduction of Islamic banking and finance system in some Organisation of Islamic Cooperation (OIC) countries in SSA spurs financial inclusion in the region,” a study by the World Bank said.

The percentage of financially excluded people in Nigeria as of 2018 declined by 4.8 points from 41.6 percent in 2016 to 36.8 percent. Compared to other regions of Africa’s largest economy, the northern part of the country reported more unbanked people owing to high illiteracy level, the insurgency in some parts of the region coupled with high poverty rate, as compiled from an industry survey.

According to the data by EFIna, millions of those who still lack access to financial services are mostly those from the North East, North Central and North West of Nigeria.

While the actual journey of TAJBANK started around November 2015 when Joda and his cofounder, Sherif Idi, conceived the idea of setting up a non-interest bank, the bank is now standing on its feet to contribute its quota in bridging Nigeria’s financial inclusion gap.

Figures by EFINA put Nigeria’s financial inclusion rate at 63.2percent, meaning as much as 36.8 percent or 36.6 million of its population still lack access.

Joda and his co-founder said they went from conceiving the idea of having a non-interest bank to capital raising, to documentation, to submission to the CBN and eventual grant of an approval-in-principle in August 2018, and subsequent grant of final licence in almost one year after with the mindset of giving access to Nigeria’s financially excluded population.

“It was a very tough journey that required mental fortitude but I am glad that we have weathered the storms and today we have opened the bank for business,” said Joda, once quoted in a press statement.

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