Kenny: Islamic Banking: Furore versus agitation: http:///nwU2eQ via @AddThis

The post above makes no sense. Pls post the content and/or the link.

@jarus, thx bruv, the link is not attaching. But here is the full story: Kenny: Islamic Banking: Furore versus agitation

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Wednesday, 17 August 2011 00:00 By Joseph Kenny Opinion - Columnists



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IF you want a loan, find a friend, not a bank —unless you are very sure you can make the payments.  If not, before long you may be homeless. And if you make the payments, when it comes to menu, you may find yourself on 0-0-1.  Interest rates may appear low in the beginning.  But when they begin to compound, you may want to abscond, start from scratch under a new identity.

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When banks lend to defaulters like you, they come on hard times.  But banks are getting wise.  They see through your bluff, your designer attire, your confident demeanour, your know-it-all discourse. They check your credit rating, your collateral, the fine print of your proposal.  Their astuteness pays off.  See the handsome profits banks are posting.

On the international scene, the name of the game is hardball.  They prefer lending to governments, not businesses.  Businesses can declare bankruptcy, but governments cannot.  What does it matter if loans are embezzled?  Government can always impose austerity measures.  The poor may complain, the rich are secure, and government cannot abscond.  With compounded interest, its debts are many times over the original loan.  Circumstances must be very hopeless before a debt is written off.  Even then, be sure land or resources are not part of the bargain.

So economic injustice is the problem.  What solutions are possible?  The Central Bank proposes Islamic banking.  Then comes furore. Why should government get involved in Islamic institutions? The furore, I think, is premature.  Muslims are proposing a solution to a problem weighing on all of us.  Why reject it out of hand, just because it is “Islamic”? Muslims, you may answer, are not bothered about economic injustice.  They simply want to obey the Qur’anic command: No interest on loans.  But, in fact, they are bothered about the injustice, and they see Islamic banking as a remedy.

Then what about its conditions?  If you take a loan from an Islamic bank, the bank and its depositors have a share in your enterprise and its profits.  Besides, your enterprise must be Sharia compliant, e.g. it cannot be a brewery.  Maybe you do not like these conditions.  No one is forcing you to use Islamic banking.  Compare it with interest banking.  It is for you to decide which is more advantageous.

But the furore gets stronger.  Islamic banking is part of a scheme to turn Nigeria into an Islamic state, step by gradual step.  Then comes agitation.  Christians are persecuting Muslims.  They won’t let us bank as our religion dictates.  They squash our well-meaning initiatives.  Islamic banking is our right.  Do not stand in the way!

“Calm down,” the referee calls.  Examine the issues.  What are the Christian complaints? (1) The first complaint is that the original guidelines of 4 March 2010 (BSD/DIR/GEN/NIB/01/008) restrict non-interest banking to Sharia banking, i.e. no other form of non-interest banking is allowed: “A non-interest bank means a bank which transacts banking business, engages in trading, investments and commercial activities, as well as the provision of financial products and services in accordance with the principles and rules of Islamic commercial jurisprudence.”

This complaint is dealt with in the revised guidelines of June 21 2011, which reverses that restriction: “For the avoidance of doubt, Section 23 (1) and Section 66 of the BOFIA 1991, (as amended) explicitly provide for the licensing of Non-Interest Banks (NIBs). The CBN is obliged, by law, to issue licences to appropriate entities for the establishment of NIBs provided they meet the regulatory requirements for licences. In view of this, the CBN is open to receiving and evaluating applications for licensing of non-interest banking institutions based on other principles rather than the Islamic variant and will soon issue separate guidelines for non-interest banking under other principles.”

(2) A more serious complaint is that CBN, by setting up a Sharia Council to oversee the Sharia banking operations, is instituting government enforcement of Sharia observance.  The  March 4, 2010 Guidelines provides: “There shall be an advisory committee on non-interest banking within the CBN to be called the CBN Shariah Council (CSC), which will be outsourced. The CSC shall advise the CBN on Islamic laws and principles for the purposes of regulating noninterest banking business.”  This arrangement follows the Malaysian model, whereby government guarantees the Sharia compliance of the banks.

But there are other models.  Sharia banking is widespread in the United States.  LARIBA Bank is licensed with the Nationwide Mortgage Licensing System, and in 19 states that require licences .  The government and licensing bodies ensure compliance with general law.  They do not regulate the Sharia aspect of its banking.  That is a matter between the Bank and its customers or professional advisers.  If word gets out that the Bank is faulty with regard to Sharia, customers can decamp to another bank that satisfies their conscience.  As for the government, in that matter, it is hands off.

The U.S. model, in my view, seems appropriate for Nigeria.  It should quiet the alarm over a creeping Islamic take-over.  It would give Muslims scope to do banking as they see fit.  And, if it succeeds, it will provide a model for others to imitate.

There has been some shift in this direction. Mallam Lamido Sanusi declared: “The Central Bank is not promoting or establishing Islamic bank, the CBN is simply licensing and regulating an institution that is allowed to exist under the law.”  And the revised guidelines state: “Another significant review is the removal of any reference to Sharia Council which has been changed to Advisory Council of Experts whose responsibility is to advise the CBN on the appropriateness of relevant financial products to be offered by the institutions.”

Yet the word “appropriateness” requires clarification.  Does that mean Sharia compliance, or simply conformity with general law?  To allay all suspicions, CBN should clearly state that, in licensing Sharia banks or “windows”, it entrusts all Sharia regulation to the banks.  If they want a warrantee, let them get it from the Supreme Council for Islamic Affairs.

• Professor Kenny teaches at the University of Ibadan

 

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Author of this article: By Joseph Kenny