Yes To Islamic Banking

Yes To Islamic Banking, But A Big No To Limit On Cash Withdrawals

Tony Ishiekwene

There has been so much debate on whether Nigeria should or should not have Islamic bank, because of the nature and mix of ethnicity and religious divide across the country. I cannot see why there should be any argument for what is purely supposed to be an economic matter, and for which the country should benefit. I also cannot see why Christians led by some desperate pastors and Bishops cannot see beyond their nose, and if they feel worried, get themselves a Christian bank, if nomenclature is their problems.

Essentially, Islamic banking entails banks giving out loans for Investments, Projects, Leases and Mortgages and not charging interests on them upfront as would normal Commercial banks, including all the shylock banks in Nigeria that have virtually killed industry and manufacturing sending unemployment rates sky high because of the cut-throat lending rates of between 30-40 Percent, sometimes more. So what could be better than that, especially for a very depressed economy, that desperately needs some cheap money for investment and industrial growth as in Nigeria? What sort of production or manufacturing will you do to pay back 30% interest after the heavy overheads costs of providing your own electricity, Water, Security and sometimes road in a country where government has absconded from all their responsibilities to the people?

Is Islamic banking cost-free? No it is not as they still have to pay their workers, including the MD and managers wages; buy computers and other Office equipments for operation, rent or acquire buildings for their operations and carry many other Overheads- both variable and fixed, as in any other commercial organization. So how would the Islamic banks recover their costs then if they don't charge for the costs of their borrowings- the essence of commercial banking? They do make profits still because they get more involved with the business of the borrower- better relationship banking- and making sure that every loan investment generates profit which the bank now shares with the borrower. That way they take more interest in the business or investment of the borrower, as they cannot afford to fail and they lose their monies. The concept or principle cannot be better for Nigeria!

I am very disappointed in the behavior of some parochial and myopic Christian pastors who see Islamic banking as “a way of trying to Islamize an otherwise secular country like Nigeria.” How can a banking practice “Islamize the whole of Nigeria? Why this unnecessary scare mongering. I think some of these pastors like Ayo Oritsejafor, are not been sincere or been economical with the truth. You know that many of the conventional bank MDs are also “Pastors,” including the thieving Erasmus Akingbola, former MD of Intercontinental bank. Oritsejafor himself runs a Micro Finance bank through his church in Warri, called Eagle Flight Micro Finance Bank at Warri, Delta State, Nigeria, and I begin to suspect ulterior motives and hypocrisy in his criticism of Islamic banking and of the Central bank governor Sanusi Lamido Sanusi, who has been doing a great job as a professional banker to clean up the mess left by the previous CBN governor, Prof Charles Soludo.

Islamic banking is already operating in UK and US and many other secular nations of the world; it is the best you can get. That way, all these bad loans and paper profit declared by "hollow" Nigerian banks will be avoided, and their Assets will be less "toxic!” If the UK and US, where Commercial banking loan rates are as low as 3% can adopt this banking system-all about choice really- I just wonder why in an economy where interest rates are in the 20s and 40% range, as in Nigeria, any one, out of religious or ethnic bigotry, should argue against interest-free banking! UK is even a Christian state or a more Secular state than Nigeria and there are now over 30 registered Islamic banks in UK, outside the ones trading in London as overseas subsidiaries of many Islamic Arab nations. And almost all the major banks in UK, including HSBC and Barclays now have Islamic banking arms or subsidiaries to trade both in the UK and take advantage of the lucrative oil money business in the Islamic Arab countries of UAE, Bargain, Saudi Arabia, Kuwait, Brunel and so on.

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Nigeria and Nigerians, not just the Muslims stand to gain from this banking practice, if they don't even kill it with the "Nigerian factor," so soon after takeoff, as is everything Nigerian. At the end of the day everyone still has a choice to choose where they prefer to bank: If you prefer to go to Oceanic, UBA or Unity bank and borrow to finance your business at 40% interest rate, you are free to do so; If I prefer any bank which offers me loan at zilch interest rate to do my business, I will jump at it and don't care what the name of the "god" of the MD of that bank is: Orisa, Ndichie, Chineke, Allah, Yahweh or Jehovah, Shivar, Krishna, Ganesh, Lakshimi or whatever your mumbo jumbo religious god or deity is.

Please let’s separate religion from business, and even politics. At the end of the day we should think of the economic benefit and the overall interest of Nigeria. That is the difference between the developed world and the so-called derisively called “Third-World” countries like Nigeria where our leadership pander to emotions, sentiments, greed and selfish interest. A UK leader would think how can this concept benefit my country? Whereas the Nigerian would think how will it benefit my church, my brother or even how much kickback I can get from it or never! We should be thinking more of how much new jobs this banking system will create; how much more productivity will it engender and all the attendant multiplier effects than whether “Muslims want to convert my people,” or North want to Islamize Nigeria? We should be doing things that unite us more rather than divisive ranting and fear of our neighbours.

LIMIT ON CASH WITHDRAWALS

When the CBN governor appeared before the Senate Committee on Banking headed by Senator Nkechi Nwogu, the matter on cash limits and withdrawals which the CBN want to take effect from June 1, 2012 was another matter they demanded explanation on apart from the “Islamic banking” issue discussed above. Whilst I endorse the Islamic banking, I have my reservation for the “Cash withdrawals limit of N150.000 and N1 million respectively, for individuals and corporate organizations.

I agree with most of the reasons why the CBN wanted this policy, including checks on Money laundering, Corruption and the “Ghana must go” cash and carry culture giving the courts and police difficult task of prosecuting and producing evidence of large bribe takings by public office holders, but we must show caution and realize the under developed, largely cash based economy which we practice and operate under. Even the UK and US, where there are so many payment systems, including Debit and Credit cards, Cheque guarantee payment schemes, Store cards, ATMs and On-line/BACS transfer payment system with a larger percentage of educated and IT literate citizens, a cash limit on withdrawals are never imposed. In the UK where I live, you can withdraw any amount from your bank account, so long as you have that amount in credit with the bank. All that is required for large sums withdrawal of say £2,000 or above is that you are required to bring in some form of photo identification like Passport or Driving License. You are not forced to withdraw less by any law that I know. I hope laziness of the Central bank regulators are not forcing this policy that will create more problems than solving, on hapless Nigerians.

With the heavy inflation and still running with a collapsing Naira exchange rate how much can N150,000 buy you or you now want individuals, building a house for example, to be going to his/her bank Monday to Friday to collect N750,000 when he needed N800,000 to pay for Roofing materials from Onitsha or Alaba in Lagos. What a disaster of a policy! For God’s sake Nigeria is still a very primitive economy, where no one wants your “spring” (bouncing) cheques, not to talk of card payments. What would you do in the villages where the old illiterate farmer and trader can’t even handle a cheque not to talk of Card and Computer on-line payments? Nigeria just cannot operate cash-less economy, yet so please shelve this idea or at worst increase the cash withdrawal limit to N300, 000 for individuals and N2million to Corporations.