Islamic Banking

Business

Islamic banking and Nigeria’s economic development

By Bello Muhammad Zaki | Publish Date: Jul 10 2011 3:15AM | Updated Date: Jul 10 2011 3:15AM

There is the need to look at its viability, or otherwise, its specialised banking operations in relation to the nation’s developmental goals, as this piece intends to do. The Islamic banking controversy was flared up by penultimate Monday’s announcement by the CBN that it had licensed JAIZ Bank to operate Islamic banking, and its subsequent issuance, the following day, of final guidelines pertaining to the system in Nigeria. Islamic banking products are sharia compliant, and unlike the conventional banking practices do not charge interest on financing whereas profits or losses are shared with the borrower or investor as the case may be, spreading the risk involved and discouraging superfluous speculations.

Nigeria has a long term economic perspective plan with a set target of developing its economy to the level of rating among the world’s top twenty economies by the year 2020, code named Vision 20:2020.

And this noble vision is being driven by the nation’s financial system; financial system being the backbone of every economy. Nigeria’s financial system consists of the Deposit Money Banks (DMBs), the Capital Market ,other non-banking financial institutions like insurance companies, pension fund administrators, finance companies, mortgage institutions, and their related regulatory agencies and the relevant enabling laws guiding their operations.

To to achieve Vision 2020 therefore, there is need for a robust and vibrant financial system that will power the economy, as the financial sector is expected to facilitate medium and long term economic growth rates. It is a known fact that a rapid financial development has helped boost growth in most developed countries, and is currently paving way for the emerging developing nations, particularly the Asian giants (Hong Kong, Singapore, South Korea and...