Non-interest banking can be used to finance terrorism -Experts warn

Finance Monday, June 27, 2011

By Babajide Komolafe

The newly introduced non-interest banking especially Islamic banking, can lead to financing of religious fanaticism and terrorism, says economic experts.



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"Nigeria has, and continues to suffer from religious fanaticism and sectionalism. With the financial systems still suffering from the consequence of, amongst other factors, weak supervision, the CBN and other regulatory bodies to be charged with supervising Non-Interest Financial Institutions (NIFIs) must be well prepared and trained. Failure in proper regulation of NIFIs might not only lead to financial losses but perhaps financing for religious fanatics and terrorism. This must be prevented by all means", they said in Lagos last week.

This position was contained in a communique issued at the end of a one-day seminar on Repurposing capital: Non-interest Banking in Nigeria, co-sponsored by Apostles in the Market Place (AiMP), a network of Christian professionals and leaders, and BusinessDay Media Limited, publishers of BusinessDay Newspapers.

The communique said: "There should be a shift in focus to Profit & Loss Sharing banking and Faith-Based Financing (FBF), rather than a more narrow definition of Non-Interest Banking (NIB).

"NIB and FBF, if properly regulated and administered, have the potential to transform the economies of underdeveloped communities, hence is a welcome development in Nigeria where on-going banking reforms have made interest-charging deposit money banks more risk averse and perhaps unwilling to venture into virgin frontiers in banking. The unbanked and under-banked in Nigeria will benefit from FBF where risk and returns are shared between provider and user of financing.

There is, however, need for a supervisory framework that recognizes the peculiarities, applicability and potential of FBF including the following: Stimulating grassroots, relationally-based investing (versus debt-based financing),Countering corruption through transparency and other faith-based financing (FBF) principles; Avoiding speculative bubbles and decreasing reckless investing; Avoiding consumer and other debt that is detached from real assets and initiatives.

"The initial (Jan 2011) NIFI framework was limited in its application as it equated NIB to Islamic Banking, in effect, barring potential non-Muslim or non-Shariah-compliant investors and participants from tapping into the benefits of NIB. The framework clearly demanded that NIFI "transacts banking business, etc and commercial activities as well as the provision of financial products and services in accordance with Shariah principles and rules of Islamic commercial jurisprudence."

Idea of Islamic banking is ill-conceived -CAN chairman

Written by Isaac Shobayo, Jos
Monday, June 27, 2011

The Chairman of the Christians Association of Nigeria (CAN), North-Central, Reverend Yakubu Pam, has stated that the idea of Islamic Banking in Nigeria is ill-conceived and called on the Federal Government to prevail on the Governor of Central Bank, Mallam Sanusi Lamido, to shelf the idea.



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Speaking with the Nigerian Tribune in Jos, the CAN chairman, who said most of the reasons adduced by the CBN governor were not cogent enough to warrant the introduction of Islamic Banking in Nigeria, said anything that had to do with religion at this material time in Nigeria should be avoided for the sake of peace in the country.

"The timing is wrong; from official angle it is also wrong. It is like inviting more religious problems for ourselves in this country, if we look at it critically, religion has never been a unifying factor for Nigeria despite the fact that the tenets of the two major religions in the country are centred on peace."

"The issue of religion is sensitive in Nigeria, most of the problems we are having in this country centre around religion or rather being linked with religion. So the CBN governor, Mallam Lamido, should consider the peace and unity of the country rather than focusing on the economic benefits, the peace and unity of this country supersede any other interest" he said.

Reverend Pam pointed out that the fact that Islamic Banking was working in other parts of the world did not mean that it would succeed in Nigeria, adding that the stereotype of Nigeria about religion was not the same with countries being used as yardstick.