In islamic banking it has become a term for both a markedup price and deferred payment a way of financing a good home, car, business supplies, etc. 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. Religious challenges of islamic banking in nigeria. With increasing wave of popularity and successes of islamic finance across the world, nigeria aspires to be the hub of islamic finance of africa. The idea was conceived in 1995 and approved by the central banking of nigeria on the march of 4th. Islamic finance in nigeria for islamic banking and sukuk. It observed that nigeria is a secular state and issues bordering on. 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. 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.
Prospects and challenges of islamic banking and finance in united states. 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. A frame work released in the same year spell out guidelines for the establishment, operations, shariah. Legal framework for islamic banking and finance in nigeria by dauda momodu 161 2009. Islamic rulings and its practical application through the development of islamic economies. 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.
Islamic banking practices from the golden age of islam nasser 1996, p. Oct 06, 2016 unconventionalislamic banking in nigeria. 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. Sections 9, 23 and 52 provided for the establishment of islamic banking in nigeria. Islamic banking is based on the principles of profit and loss sharing. Joining a growing number of subsaharan african nations. Islamic finance, islamic banking, monetary policy, financial stability, sukuk authors email address. 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. Jan 06, 2011 the islamic financial service board ifsb expects the global islamic finance assets to reach usd 1. In nigeria, islamic banking according to abikan 2011 was first licensed in 1963 in the southwest zone.
At present, the islamic banking industry has acquired above 11. Islamic banking stands for as well as the gains which nigeria and nigerians stand to. Islamic banks adhere to the concepts of islamic law. International journal of academic research in business and social sciences april 2015, vol. It was descriptive study that relied on secondary sources of data and adopted content analysis method. Mohammed waseem march 10, 2014 islamic banking products part 2 musharakah 20140310t19. Dearth of knowledge, skills and technical capacity to regulate, and supervise islamic banks.
The draft was as a result of the amendment of central bank of nigeria act of. 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. 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. This paper aims to highlight on the challenges of islamic banking and finance products in nigeria, particularly jigawa state, using the content analysis method. Journal of islamic banking and finance julyl sept 2016 1. Challenges and prospects, international journal of management sciences, research academy of social sciences, vol. Nigeria based guaranty trust bank bb and ngbbbnga2 ratings affirmed. An overview, by nana aisha salaudeen editor oct 6, 2016 9. Islamic finance in nigeria finance and banking nigeria. Since then, islamic bank was unable to surface until 1991 during the amendment of other financial institution by cbn. Most islamic banks in nigeria operate without using an islamic. Nigeria based zenith bank bb and ngbbbnga2 ratings affirmed. Nigerias first islamic bank begins business in three branches.
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. 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. 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. Sukuk issues and takaful islamic insurance constitute the bulk of sharia. 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 finance is rapidly growing across the globe, with presence in europe, the middle east, asia, north america and africa. Islamic banking in nigeria got approval from the central bank in 2011, after several years of attempts by different groups and organisations. Instead, the bank earns profit and fees on the financing facilities that it extends to customers. This was a strong signal to seek for alternative banking. This step signified an important move to reorganize the legal framework of nib in nigeria.
Islamic financial products now comprise a broad range. 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. Islamic banking products and challenges in nigeria sahara. In 1992, the central bank granted license for habib nigeria bank limited former bank phb and now keystone bank. Islamic banking in nigeria dated back around 1960 in lagos with muslim bank west africa limited. Legal framework for islamic banking and finance in nigeria. 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 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. Early this year, the nigerias apex bank issued a license to jaiz bank plc. 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. Islamic banks that is operates alongside in the industry. The experts were drawn from practitioners and academicians based on their knowledge and fieldwork experience in shariah and islamic banking and finance. 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.
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. As a result of that, jaiz bank became the first and the only fullfledged islamic banking in nigeria. Zenith bank plc announces payment of interim dividend for half of the year. Jul 09, 2011 evolution and trends in islamic banking. Islamic banking products islamic banking information. Keywords nigeria, islamic finance, actornetwork theory, islamic banking. Evolution and trends in islamic banking vanguard news. 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 legal system is supposed to regulate and license the islamic banking business, besides imposing control and supervision of the affairs of the islamic banks. 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. Original research article impacts of mergers and acquisition. Hence, the central bank of nigeria cbn is no exception to this unique. This is especially true in economic relationships, such as banking and finance in the. Also cbn granted license to habib bank to deal in interest free. 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.
Munich personal repec archive developing islamic liquidity management instruments. 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. However, despite its potentials and prospects, islamic banking is plagued with both institutional and operational challenges that retard its smooth functioning. In 2010, the islamic banking sector assets are expected to grow by more than 20per cent to usd 950 billion.
This was ceased by minister of finance chief obafemiawolowo in 1962. In addition, this paper also examine the stability of islamic bank. Partly as a consequence, the practice of islamic banking ib has, in some. We hope that the paper will be useful in this regard to provide another valuable theoretical dimension to this field. Owing to this a research study on the issue is necessary. This this is not novel, as similar dual ba nking system operates i n countries such as malaysia. They are therefore a veritable social mechanism for enhancing christianmuslim partnership. Islamic banking and finance in nigeria munich personal repec. First bank of nigeria limited guaranty trust bank plc skye bank plc union bank of nigeria plc united bank for africa plc. 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.
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. Increasing the potential of islamic finance in africa cnbc africa discussed the growth potential of islamic finance in africa. 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. This form of banking revolves around several wellestablished principles based on islamic laws. The banking system is very significant in the development process of every economy.
All banking activities must avoid interest, a concept that is forbidden in islam. Developing islamic liquidity management instruments. The primary source of shariah is the divine islamic law as revealed in the holy quran. Pdf the recent development of insolvency of many conventional banks in nigeria made the central bank of nigeria central bank of nigeria to initiate. Meanwhile, the emergence of islamic banking in various muslim countries has.
As a result, jaiz bank became the first and the only fullfledged islamic bank in the country. The growth of islamic banks all around the world is based on the high level of response to islamic banking facilities. The operational challenges of islamic banks and its. Challenges for islamic banking in jigawa state, nigeria. This trend continued in the 1950s and 1960s, when the first islamic banks in the modern history were. The history of islamic banking in nigeria is recent and dates back to the mid1990s. Shariah compliant fintech in the banking industry springerlink. Pdf prospects and challenges of islamic banking and finance. 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. Islamic banking products and challenges in nigeria. 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. Spss survival manual a step by step guide to data analysis using spss windows.
Habib nigeria bank limited pioneered islamic banking in nigeria. 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. The bank s balance sheet has grown from n12 billion in 2012 to about n62 billion, with asset financing of over n30 billion. The banking system in nigeria is generally regulated by banks and other financial institution act bofia, cap b3 laws of the federation 2004. The islamic financial service board ifsb expects the global islamic finance assets to reach usd 1. 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. An alternative to conventional market is emerging in form of islamic banking and noninterest banking. The islamic banking is envisaged to coexist with the conventional banking in nigeria. 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. Problems and prospects of islamic banking in nigeria.
However, the advocacy for the islamic banking system as alternative to conventional banking. 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. Islamic banks can be a source of financing for entrepreneurship, whereby entrepreneurs can obtain their capital from islamic banks. 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. Gods laws, as contained in the scriptures, form the nucleus of society.
Noninterest banking is a profitable growing global phenomenon practiced in nearly 70 countries across the world including the. Exploring the development of islamic banking in nigeria using an. Exceptions given in islamic banking under these two contracts account for many islamic mortgages jeroen, 2005. 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. This research work seeks to examine the impacts of mergers and acquisition of commercial banks performance in nigeria as the main objective.
The license was later withdrawn by the authorities of the then western region. 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. Uba plc h1 2018 conference call and earnings presentation the key takeaways. Today islamic banking has gain greater grounds in many countries of the world. Islamic banking is consistent with the principles of sharia which prohibits acceptance of interest on loans. The process of the introduction of noninterest banking in. 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.
Islamic banking system emerged as the major alternative to conventional banking system. Islamic finance has enjoyed much success since its inception nearly four. Cbn to initiate the acquisition of some banks while others were ordered to merge is a strong signal to seek. 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.
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