Dr. Tunde Lemo is Deputy Governor in charge of Operation in the Central Bank of Nigeria (CBN). He recently had an interaction with media on various issues where he was asked to respond to the public debate over the issue of Non-Interest banking popularly known as Islamic banking system in Nigeria. The Economic Confidential magazine presents here excerpts from the interaction:
Is it true there is a portion in CBN Act that states that one cannot incorporate a name that bears sectional and religious interests?
Well that section is talking about any banking franchise just adopting a name that bears such tags. That is completely different. If you check the banking Act (CBN Act) particularly the Universal Banking Model, it gives a window for non-interest banking, and Islamic Banking is an arm of Non-Interest Banking and so there is no contradiction. The first is that if you want to adopt a name that bears Nigeria Islamic Banking or whatever. You cannot do so unless you seek the permission of the CBN Governor. That is talking about name generally, not even about a product.
So what is this Non-Interest Banking all about?
Let me explain this to you. Non-Interest Banking is a product. It is not about Religion. In Nigeria, this is a programme that started several years before the appointment of the current Governor, Sanusi Lamido Sanusi. The current Governor has only spent two years and one month in office, and the first application for license was about ten years ago or more. I recall that three years ago I led a team to Malaysia to develop the framework for Non-Interest Banking, part of which, of course is Islamic Banking we are talking about.
Could there be reason for the interest in the new product?
We are talking about an alternative product. It is all about financial inclusion. About two or three years ago, we were really concerned that so many Nigerians were unbanked on account of economic (status) wellbeing and that was what made us to begin to license micro-finance institutions. And also, there are so many people in Nigeria who will not put their money where interest is earned because, of course, it offends their faith. Therefore, we are providing a window whereby such people will also not be left unbanked just because they cannot put money (in banks) where they earn interests.
Does it mean to address challenge of adherent of a particular faith?
Incidentally, all the issues that are contained in that model are actually issues that are well written in the Bible. So when you talk about Non-Interest, it is actually called usury: you don’t put money in gambling, you don’t put money in liquor and all of those things. Proverbs 20:1 Wine is a mocker, strong drink is raging: and whosoever is deceived thereby is not wise. So none of those provisions actually offend even the Christian Religion. But, think about it. It is not even about Religion, it is about providing alternative channel, whereby we are able to network or put everybody in the financial landscape depending on the type of model of banking they prefer, and the Central Bank is not promoting Islamic Banking, it is not true. We are saying that to the extent that the banking laws permit it, then we must regulate it. You may be aware that the ethical funds, bi-lotus capita, have been given the framework and it is already being regulated by SEC (Securities and Exchange Commission). But we as regulators must ensure that any financial model that anybody comes up with, we stand ready to regulate just to ensure that banking business is conducted in a proper manner.
Can you name few places where Islamic Banking is practiced?
Today if you walk of Edgware Road you’ll see Islamic Banking of United Kingdom. It is there in Malaysia. We just gave a license (Nigeria franchise) to a South African (Bank) to have an Islamic Banking window and so on and so forth. I think Nigerians should rise above sentiments and move on.When you look at the framework, even those institutions you talked about, we are saying there would be no discrimination on account of patronage, no discrimination on account of recruitment of staff, no discrimination on account of who becomes customers, so on and so forth.
Are you now saying that this banking practice has no religious connotation?
There is nothing religious about this at all. It is a channel freely chosen. If you freely chose to use that channel to conduct your banking business, then we will be ready to regulate it. I believe with this, all the misgivings about Islamic Banking would be put to rest finally.
Looking at the volatile nature of religion in Nigeria currently, do you think the timing is right?
I have said that Non-Interest Banking is not about religion. I know that there is a Jewish model somewhere in the United States of America. Tomorrow, somebody can come up with a request and say we should license Non-Interest Banking based on Christian faith. So there is nothing religious about it, we are not just starting it now. I told you three years ago we went to Malaysia. So it is a work in progress. It is an ongoing process. It is not as if we just woke up yesterday and said this must happen. I think you all have a responsibility, particularly, gentlemen of the press to disabuse the public that this is not about religion at all.
Can Christians be beneficiaries?
Let me also tell you this: perhaps you don’t know that the Islamic Development Bank (IDB) has funded about ten projects in Nigeria. Do you know that nine of those projects belong to Christians? So there is nothing religious about it. We did not just start yesterday, it is an ongoing process, and there is nothing new about it; there is nothing religious about it; it is just an additional channel to ensure that everybody is on board or given the framework of financial inclusion.
One of the principles of Islamic Banking is that it is run by a Sharia Council. Won’t this bring about a situation of double regulation between CBN and the Sharia Council?
It is not true that Sharia Council regulates anything. These are council of experts on Islamic jurisdiction. When you hear the word Sharia it is just because of the way it has been used. And I tell you, it is like an ethical fund, they are those who will say; that investment outlet is in line with the principles and that investment outlet is not in line with the principles. It is an advisory council, it is not to usurp the duty of the Central Bank of Nigeria. It is just to give advice from time to time about the way the investment channel is. Just to ensure that we keep within the framework. it is not in our organogram. They are council of experts in the Islamic jurisdiction that ensure that those funds will not move into areas other than what they intend it to be, and the areas are not areas that are divided along religious line. They are areas that are divided along ethical line. For instance, I say my money should not go into gambling: somebody should be able to say we are sure your money will not go into gambling. My money should not go into the production of liquor, or prostitution, there should be somebody to give the assurance that the money will not go into such investments, and these are things that offend both religions. So I just don’t understand why we make a mountain out of a mole hill.
Finally and again are you saying there is no religion in it?
No! No!! No!!! What I am saying is that if you want to talk about the ethical issues in that framework, they are ethical issues that are raised by both religions Islam and Christianity. We are talking banking products. Do you know today, even as commercial banks they have what they call target market definition? Areas where they want to go and areas where they don’t want to go and it has never been an issue. I think the less we discuss things that divide us in this country the better we will be. If Singapore can harbour Islamic banking why can’t we? A South African bank with subsidiary in Nigeria just requested for a window where they can render that service. It is in Hong Kong, United Kingdom and United States of America.