For three days, Muslim intellectuals recently gathered at the Crescent University, Abeokuta, Ogun State, to discuss the modalities for the successful establishment of Islamic banking system in the country. Sulaimon Adesina reports the event, the  pains and gains of stakeholders at entrenching alternative banking system in Nigeria.

“As Muslims, we know quite well that the world could have been saved from the trauma of implotion which brought even the acclaimed advanced economies to their knees.

That shield, that protection is innate to Islamic Economics and all its appurtenances, including the Islamic banking and finance, which has been chosen for deliberation at this conference.” With that statement coming from the globally  acknowledged jurist, and the facilitator of the gathering, Prince Adul Jabar Bola Ajibola, participants were welcomed to the first locally organised International Conference on Islamic Banking and Finance. And with the venue being the Crescent University, Abeokuta, another of Ajibola’s initiatives, the message of the earstwhile Nigeria’s Attorney General was clear to all; Islamic banking has become a necessity in Nigeria.

So for three days (20-22 March, 2010), Muslim academics, finance practitioners, industrialists, students, and interestingly, the regulators, discussed the way forward for the entrenchment of Islamic banking into the nation’s financial landscape. It is certainly not by accident that the organisers have picked “Global Financial Crisis: Islamic Banking as a Credible Alternative System” as the theme of the conference; the world is yet to recover from the mess it has found itself in the past two years, due to the collapse of the mortgage system in the United States  (USA), America and by extension, the fall of many economies all over the globe.

The realities
The concensus of the paper presenters at the conference (20 in all) was on the past failures of the conventional banking system to position the world to meet the mounting technological and social challenges. One of the speakers, Mrs Abibat Olamide Bello of the ING Investment Management, Atlanta Georgia, USA whose paper focused on ‘Islamic Banking and Global Financial Crisis’ said: “My message may have particular resonance in the West after the crumbling of the US Mortgage market left banks holding hundreds of billions of dollars of nearly worthless credit instruments tied to home loans by a web of complex structures.” And for Professor S.U.Balogun, the chairman of the organising committee of the conference, “the operation of interest in the conventional banking has earned the banking system certain characteristics such as exploitation, monopoly, and inflation.”

One would go on and on, but the reality is obvious. Since 2008, the globally fancied economies, and the unacclaimed ones alike, have been at the receiving end of a mortgage shock in America, an incident that has further exposed the ineffectiveness of the conventional banking system to help  an average man meet his economic goals. If the calamity has only weakened the global economies, then, the economists only need to come up with  amendments that would put things in order. But the crisis seemed to have killed any pinch of idea in the economists.

The future of the ordinary individual is no more predictable with any degree of certainty. Lawal Kazeem, Vice President, Bank of America, who presented a paper entitled ‘Sharia Requirements in Islamic Banking’ noted, “The global credit crisis has heightened the awareness of consumers around their financial needs and what the future holds with respect to their financial viability. This phenomenon has become a major concern for everyone, including high net worth consumers in the market place. Consumer confidence for banks and banking systems have tanked and hit an unprecedented nose dive ever since the crisis began two years ago.”

It is evident also that the interest rate has been identified as a great contributor to the financial crisis. In the words of many of the paper presenters,  charging of interest on money lent out, which is a critical basis of the capitalist initiative, has put many household in a fix. The rich, they said, had continued to amass wealth while the poor have wallowed in penury. This fact is already acknowledged, even by the proponents of the capitalist initiative. The Bank of England, for  most part of  2009, fixed interest rate at zero per cent. Other major financial institutions have significantly reduced their rate of interest. Abibat Bello put the value of the world’s organisations that have collapsed as a result of the problem at $14.5 trillion (as at 2009).

The necessities
No doubt, the world needs an alternative. Mohammed Mohammed, who represented the governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi, joined the deputy governor of Ogun State, Alhaja Salmot Badru, to affirm that Islamic banking remained the credible alternative that would galvanise the development of the human folk. Badru put  it more clearly, “Islamic Banking would change the face of banking in Nigeria.”

Not only this, the natural attributes of the Islamic banking system: Prohibition of Riba (interest), prohibition of Gharar (trade in uncertain instruments), prohibition of unequitable contracts, encouragement of equitable contracts, discouragement of greed, discouragement of exploitation, encouragement of equitable wealth distribution and re-distribution, support for the overall growth and development of the individual, concern for the overall growth of the community at large and dealings based on trust and equity, among others, which are the opposites of what transpires in the conventional banking system, are themselves enough reasons for quick coming of the Islamic banking system.

Islamic banking system is not new to the world. Malaysia and some other countries in Asia, as well as a sizeable number of countries in the Middle East have alredy tasted the benefits of the initiative. In fact, the UK, France, Japan, and even China are seriously considering  some form of Islamic-compliant finance for their domestic market. And interestingly, it has proved to stand the test of many calamities that have exposed the conventional practice. Professor Sherifdeen Tella, Vice-Chancellor, Crescent University, noted, that, “records show that no Islamic bank suffered the contagion effects of the global crisis.”

The impediments
As prosperous as the Islamic banking system is, its establishment in the country has suffered repeated disappointments and shocks. Many have even given up the hope of the system seeing the light of the day. For some, the faults are traced to the authorities, who, allegedly have refused to fast track the process of approving the earlier efforts of Muslims in this regard. Others think and have openly expresed that the system, being Islamically inclined, would be politically schemed out of events. But the Muslims have to face the reality.

The onus of the entrenchment of Islamic banking rests on their shoulders, and the earlier they realise this, the better not only for the Muslims but also the society at large. Muslims in Nigeria are still bereft of the proper knowledge of the concept of Islamic banking. This knowledge gap must be bridged if we hope to realise this lofty aim in the nearest future. The awareness has to start, and most importantly, sustained. We certainly cannot rule out the big part to be played by the regulators in the workings of the system. The CBN was recently quoted as saying that it had granted an approval in principle to the Jaiz International Bank Plc to operate an Islamic bank.

But the apex bank also confirmed that it was still working on the supervisory framework for the operations of the non-interest financing in the country. Suffice to say that Islamic banking would see the light of the day if the regulatory framework is provided on time. The CBN has so far come out with a draft framework for this purpose, and is getting the response of the stakeholders on it. The CBN has to hasten up the process if it would live by its words of being ready to provide the necessary tools to facilitate Islamic banking.

What next?
For re-awakening  Muslims to the great task at hand, the Crescent University deserves people’s commendation. The next lines of action were proffered by the eminent scholars at the conference, and from the 12-point communique issued at the end of the conference, there is the need for an alternative financial system, to allow for competitiveness, ethical co-integration and enthronement of social order; there is the need for an enabling environment to promote and establish the Islamic Bank of Nigeria; and there is the need for more workshops, as follow up to the recommendations of the conference.

For those yearning for the establishment of the programme, Lawal Kazeem’s poser will certainly be useful: “Are we really ready for Islamic banking in Nigeria?”