Dearth of knowledge, skills and technical capacity to regulate, and supervise islamic banks. Islamic banking has the same purpose as conventional banking except that it is operating in accordance with the rules of sharia, known as figh almuamalat islamic rule son transactions the basic principles of islamic banking is the sharing of profit and loss and the prohibition of riba interest. This research work seeks to examine the impacts of mergers and acquisition of commercial banks performance in nigeria as the main objective. Samira mensah, associate director for financial institutions ratings at standard and poors and ameen hassen, head of shariah banking at standard bank participated in a discussion which highlighted the growth space for islamic finance in africa. Islamic banking products and challenges in nigeria sahara. The banking system in nigeria is generally regulated by banks and other financial institution act bofia, cap b3 laws of the federation 2004. Mohammed waseem march 10, 2014 islamic banking products part 2 musharakah 20140310t19. The principle goals and functions of the islamic banking system include economic wellbeing with full employment and maximum rate of economic growth, equal distributions of income and wealth and as a result socioeconomic justice, and the generation. Islamic banking is based on the principles of profit and loss sharing. First bank of nigeria limited guaranty trust bank plc skye bank plc union bank of nigeria plc united bank for africa plc. This paper aims to highlight on the challenges of islamic banking and finance products in nigeria, particularly jigawa state, using the content analysis method. Challenges and prospects, international journal of management sciences, research academy of social sciences, vol. They are therefore a veritable social mechanism for enhancing christianmuslim partnership.
Nigeria based guaranty trust bank bb and ngbbbnga2 ratings affirmed. Despite the fact that islam as a religion exists since the seventh century ce, footnote 10 islamic banking has only relatively recently come into existence, notably, in the 60s of the 20th century. Islamic banking is consistent with the principles of sharia which prohibits acceptance of interest on loans. In addition, this paper also examine the stability of islamic bank. Following from this, the cbn under the governorship of mallam lamido sanusi, announced in june 2011, set of regulations on noninterest banking, which includes islamic banking reiterating that the introduction of islamic banking is part of its drive to propel nigerias economy and. This trend continued in the 1950s and 1960s, when the first islamic banks in the modern history were.
Islamic banks that is operates alongside in the industry. The political economy of the proposed islamic banking and finance. Dec 27, 2016 january 2012, the central bank of nigeria granted jaiz bank an approval in principle to operate as a regional interestfree bank in northern nigeria. Nigeria s quest for a virile banking reform had led to the adoption of several strategies that would truly give the nations economy an edge towards growing sustainability. Islamic banks adhere to the concepts of islamic law. The banking system is very significant in the development process of every economy. Nigeria s first licenced islamic bank, jaiz bank plc, has commenced full operation of noninterest commercial banking in nigeria from three branches in abuja, kaduna and kano. Most islamic banks in nigeria operate without using an islamic. Sukuk issues and takaful islamic insurance constitute the bulk of sharia. International journal of academic research in business and social sciences april 2015, vol. Islamic banking products and challenges in nigeria. Islamic financial products now comprise a broad range. Shariah compliant fintech in the banking industry springerlink.
The islamic banking is envisaged to coexist with the conventional banking in nigeria. Developing islamic liquidity management instruments. It was descriptive study that relied on secondary sources of data and adopted content analysis method. In 1992, the central bank granted license for habib nigeria bank limited former bank phb and now keystone bank. Meanwhile, the emergence of islamic banking in various muslim countries has. The rise of islamic banking in nigeria rooted in 1991 with the promulgation of banks and other financial institutions acts bofia, which replaced the banking acts of 1969. Islamic finance, islamic banking, monetary policy, financial stability, sukuk authors email address. Oct 06, 2016 unconventionalislamic banking in nigeria. Journal of islamic banking and finance julyl sept 2016 1.
Islamic banking specific standards have been developed by specialized standardsetting bodies, but regulatory and supervisory frameworks in many jurisdictions do not yet cater to the unique risks of the industry. The growth of islamic banks all around the world is based on the high level of response to islamic banking facilities. Islamic rulings and its practical application through the development of islamic economies. Problems and prospects of islamic banking in nigeria. However islamic banking is of related purpose to other forms of banking except that it operates using sharia rules known as figh almuamalat rules for islamic transactions.
Islamic banking and finance in nigeria munich personal repec. Increasing the potential of islamic finance in africa cnbc africa discussed the growth potential of islamic finance in africa. The idea was conceived in 1995 and approved by the central banking of nigeria on the march of 4th. Habib nigeria bank limited pioneered islamic banking in nigeria. Owing to this a research study on the issue is necessary.
Besides that, this paper will look into the ability of the islamic banking in malaysia to be an alternative or substitute for the commercial bank during the financial crisis. The history of islamic banking in nigeria began in january 2012, when the central bank of nigeria granted jaiz bank an approval in principle to operate as a regional interestfree bank in northern nigeria. The history of islamic banking in nigeria is recent and dates back to the mid1990s. Sections 9, 23 and 52 provided for the establishment of islamic banking in nigeria. Challenges for islamic banking in jigawa state, nigeria. The islamic financial service board ifsb expects the global islamic finance assets to reach usd 1. Islamic banking in nigeria got approval from the central bank in 2011, after several years of attempts by different groups and organisations. In respect to the effect of islamic banking on financial literacy among smes, the findings of the study indicated that islamic banking has improved financial decision making processes. Resolving the impasse between central bank of nigeria cbn and jaiz bank plc aliyu, shehu usman rano international institute of islamic banking and finance, bayero university kano 19 april 2015 online at. The banking decree preventing banks from using direct islamic names as bank names has also diminished the increase of islamic banks in nigeria as banks that want erupt using an islamic name will find it difficult. Islamic banking system emerged as the major alternative to conventional banking system.
An overview, by nana aisha salaudeen editor oct 6, 2016 9. Islamic banking has the same purpose as conventional banking except that it operates in accordance with the rules of sharia, known as fiqh almuamalat islamic rules on transactions. With increasing wave of popularity and successes of islamic finance across the world, nigeria aspires to be the hub of islamic finance of africa. A key regional player in west africa, nigeria accounts for about half of west africas population with approximately 202 million people and one of the largest populations of youth in the. This form of banking revolves around several wellestablished principles based on islamic laws. Gods laws, as contained in the scriptures, form the nucleus of society. It observed that nigeria is a secular state and issues bordering on. This was a strong signal to seek for alternative banking system. Noninterest banking is a profitable growing global phenomenon practiced in nearly 70 countries across the world including the. Jul 09, 2011 evolution and trends in islamic banking. Today islamic banking has gain greater grounds in many countries of the world. Uba plc h1 2018 conference call and earnings presentation the key takeaways.
Instead, the bank earns profit and fees on the financing facilities that it extends to customers. The central bank of nigeria cbn approval of a noninterest islamic banking in nigeria has generated a lot of controversy along religious divide and this motivated the study. This was a strong signal to seek for alternative banking. Jaiz bank plc is a national bank and a quoted public company owned by over 26,000 shareholders spread over the six geopolitical zones of nigeria. Islamic banking products islamic banking information. The performance of conventional and islamic banks in the. One basis principle of islamic banking is the sharing of profit and loss and the prohibition of the rate of interest.
The nigerian banking reform precipitated the adoption of islamic banking and. The research used shareholders fund and profit after tax of the selected banks as proxies to measure the financial efficiency of the banks in both pre and post consolidation eras in nigeria. Also cbn granted license to habib bank to deal in interest free. This was ceased by minister of finance chief obafemiawolowo in 1962. The aim of this research is to find out the opportunities for development and growth of islamic banking in the uk and main challenges which are currently faced by islamic banking in the world generally and the united kingdom especially. Cbn to initiate the acquisition of some banks while others were ordered to merge is a strong signal to seek. Evolution and trends in islamic banking vanguard news. Islamic banks can be a source of financing for entrepreneurship, whereby entrepreneurs can obtain their capital from islamic banks.
The country, for instance, has an estimated population of over 170 million people, a strong banking industry and a highly receptive and agile capital market in the continent, its dream is about to become a reality. Dec 25, 2016 islamic banking products and challenges in nigeria in january 2012, the central bank of nigeria granted jaiz bank an approval in principle to operate as a regional interestfree bank in northern. Keywords nigeria, islamic finance, actornetwork theory, islamic banking. Munich personal repec archive developing islamic liquidity management instruments. In 2010, the islamic banking sector assets are expected to grow by more than 20per cent to usd 950 billion. This is especially true in economic relationships, such as banking and finance in the. The document was issued as an exposure draft for comments, suggestions or inputs from the public.
Issues and prospects by nuruddeen abba abdullahi bayero business school, bayero university, kano nigeria abstract the nigerian banking reform precipitated the adoption of islamic banking and finance in 2009 as additional door to banking mechanism in the country. Exploring the development of islamic banking in nigeria using an. The legal system is supposed to regulate and license the islamic banking business, besides imposing control and supervision of the affairs of the islamic banks. Jan 06, 2011 the islamic financial service board ifsb expects the global islamic finance assets to reach usd 1. We hope that the paper will be useful in this regard to provide another valuable theoretical dimension to this field. Pdf the recent development of insolvency of many conventional banks in nigeria made the central bank of nigeria central bank of nigeria to initiate. Nigerias first islamic bank begins business in three branches.
Exceptions given in islamic banking under these two contracts account for many islamic mortgages jeroen, 2005. As a result of that, jaiz bank became the first and the only fullfledged islamic banking in nigeria. The recent development of insolvency of many conventional banks in nigeria made the central bank of nigeria central bank of nigeria to initiate the acquisition of some banks while others were ordered to merge. Legal framework for islamic banking and finance in nigeria. Hence, the central bank of nigeria cbn is no exception to this unique. Pdf prospects and challenges of islamic banking and finance.
The operational challenges of islamic banks and its. It is in this direction that the central bank of nigeria cbn under chukwuma soludo issued a draft framework for noninterest banking islamic banking in march 2009 an initiative intended as a platform for seamless and robust link to international financial markets. Early this year, the nigerias apex bank issued a license to jaiz bank plc. Islamic finance is rapidly growing across the globe, with presence in europe, the middle east, asia, north america and africa. The process of the introduction of noninterest banking in.
The primary source of shariah is the divine islamic law as revealed in the holy quran. Journal of islamic banking and finance julyl sept 2016 7 editors note in pakistan, the islamic banking industry has shown significant progress particularly over the last one and half decade. This step signified an important move to reorganize the legal framework of nib in nigeria. All banking activities must avoid interest, a concept that is forbidden in islam. However, the advocacy for the islamic banking system as alternative to conventional banking. Islamic banking in nigeria dated back around 1960 in lagos with muslim bank west africa limited. Nigeria based zenith bank bb and ngbbbnga2 ratings affirmed. Islamic banking has evolved into a whole new world of islamic finance which also includes insurance takaful, islamic fixed income instruments sukuk, islamic asset management, among others. Since then, islamic bank was unable to surface until 1991 during the amendment of other financial institution by cbn. This this is not novel, as similar dual ba nking system operates i n countries such as malaysia. Islamic banking products and challenges in nigeria in january 2012, the central bank of nigeria granted jaiz bank an approval in principle to operate as a regional interestfree bank in northern. Participants in the development of modern rf banking 232 rf banking consumers and potential users 243 shariaa and the laws of the land 244 developing the art of islamic banking and finance 245 the approach used to develop the art of islamic rf banking 245 major objections of shariaa scholars to the conventional ribabased finance contract 249. An alternative to conventional market is emerging in form of islamic banking and noninterest banking.
Partly as a consequence, the practice of islamic banking ib has, in some. The world bank is helping to fight poverty and improve living standards for the people of nigeria with more than ibrd loans and ida credits since 1958. Joining a growing number of subsaharan african nations. Nigerias first licenced islamic bank, jaiz bank plc, has commenced full operation of noninterest commercial banking in nigeria from three branches in abuja, kaduna and kano. Legal framework for islamic banking and finance in nigeria by dauda momodu 161 2009. Islamic banking in nigeria, but in order to achieve these, all the stakeholders in the area of islamic banking system in nigeria need to strive to address the following challenges as identified by sanusi, 2011 pp. The experts were drawn from practitioners and academicians based on their knowledge and fieldwork experience in shariah and islamic banking and finance. The bank s balance sheet has grown from n12 billion in 2012 to about n62 billion, with asset financing of over n30 billion. Islamic finance in nigeria for islamic banking and sukuk.
However, despite its potentials and prospects, islamic banking is plagued with both institutional and operational challenges that retard its smooth functioning. Islamic finance has enjoyed much success since its inception nearly four. In nigeria, islamic banking according to abikan 2011 was first licensed in 1963 in the southwest zone. The draft was as a result of the amendment of central bank of nigeria act of. The success of the latter led to the establishment of a series of similar banks, including faisal islamic bank sudan and kuwait finance house kuwaitboth in 1977. Islamic finance in nigeria finance and banking nigeria. Spss survival manual a step by step guide to data analysis using spss windows. Original research article impacts of mergers and acquisition. At present, the islamic banking industry has acquired above 11. Against this background, the study seeks to empirically assess the perceptions of the nigerian muslim youths in malaysia who are considered among the vanguards and advocates for the establishment and operation of islamic banking in nigeria, especially in view of their level of education, exposure and islamic commitment. Feb 23, 2015 nigeria s central bank has issued guidelines for an advisory body that will oversee islamic banking in the country, becoming the latest regulator to opt for a centralised approach to the industry. A frame work released in the same year spell out guidelines for the establishment, operations, shariah. Islamic banking, also known as noninterest banking, is a banking system that is based on the principles of islamic or sharia law and guided by islamic economics.
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