‘Islamic finance is not religious, but ethical business’
Professor Binta Tijani Jibril is the Director of International Institute of Islamic Banking and Finance, Bayero University, Kano State. The head of the lone university-based Islamic banking institute in West Africa told CHIJIOKE NELSON in this interview that the model is business, ethical, not religion and about sweeping global economies with its appealing concepts.
Why Islamic financing and how acceptable is the banking model?
We are talking about an alternative system of finance that is viable, resilient, and that is first and foremost ethically compliant. That is the only difference between the Islamic finance and the conventional finance. Islamic finance is not necessarily about charity, it is good for Muslims and equally good for non-Muslims. Countries around the world, both Muslim countries and Muslim-minority ones have tested and attested to the viability of Islamic finance as a good alternative.
In particular, after the global financial crisis of 2008, which was tagged “economic meltdown,” while other conventional banks where suffering, people noticed that Islamic financing institutions remained resilient. They were mostly not affected by that particular crises and the major reason is that Islamic financing is asset backed. So, once you are dealing with assets, it means that there is a direct link between the financial sector and the main sector of the economy. Now Europe, America, and other countries in Africa not necessarily North Africa, are now keying into Islamic finance because its value has been realised by Muslims and non-Muslims alike.
How will the Islamic finance model help Nigerians?
What Islamic banking and finance will do in general is that it will increase financial inclusion. There are so many Muslims and non-Muslims that are not yet engaged in the formal financial system, perhaps because of their religion. Majority of them are Muslims, while some are also Christians because this issue of protection of interest applies to all. Note also that there are Christians that are averse to interest rate, so because of that so many people are operating outside the mainstream financial system and we know inclusion is critical for economic growth. If your rate of financial inclusion is high, it’s very difficult to achieve economic development. So when you have alternatives that many people will feel comfortable with then you are increasing the deepening and making development a reality.
Can you contrast this model from the conventional banking system?
Interestingly, people have raised a very important issue about ethics. In Islamic finance, beside the prohibition of interest, which we all know, another thing is that it is necessarily ethical. The major problem we have in the banking system is the breakdown of core values and ethics. The bane of our economic growth is corruption and corruption applies in all sections of the economy. So, in Islamic finance when you talk about ethics, strong cooperate governance and these are issues that are of great concern to all businesses.
How does this model make money?
First, how would the conventional bank make money if it does not charge interest? This is what I call the conventional finance mindset because everything is about interests. It lends money and ensures that it has structures that will ensure that the money will return and not only to recovers the money but to recover it with its interest and sometimes, compound the interest without caring about the borrower. In Islamic finance, as a salary earner, its assumed that you are borrowing to pay your children’s school fees or buy food stuffs or such other things and what the banking model will do is to pay the school fees of your children, supply you with those commodities that you require, and then make profit from the commodities it purchased for you. That is what I mean when I say linking finance with real assets and real economy.
What do you see as challenge for the model?
The most important one is how to educate our people to create awareness and that is what we are doing now. We have to train people to make sure they understand what Islamic finance is all about and once we have achieved that, definitely the practice and correct principle will be achieved.
To start something is always very difficult. This issue of lack awareness is what we realised as the major problem when establishing the institute at Bayero University. Now we are doing short training programs, which we started in 2016. Before now we were concentrated on our post-graduate programme only, but you can acquire a masters degree in Islamic finance and very soon we will also start a doctorate programme.
We have a special programme for journalists and incidentally we have reached an agreement with the Media Trust and several media houses in Kano to train journalists in Islamic finance and it’s a free training. The media needs to be reporting it correctly. We have also realised that we cannot just remain in Bayaro University and spread awareness across Nigeria and West Africa. For one thing, this institute is the only institute of Islamic banking and finance in West Africa that is university-based. So, we really need to do more.
So, in this task, the media is our partner in progress. We cannot be able to create the necessary awareness until and unless we give this kind of training and create the necessary awareness in the mainstream and the social media too. Within the year, we will conduct that first training for the media.
We won’t restrict it to Kano. The conference will just be a matter of time, because we do conferences annually, I mean international conferences. The one we had this year was in January and the attendance was overwhelming. Over 1000 people attended the conference from more than 20 countries. We had attendance from the U.S, Canada, Morocco, Malaysia, Indonesia, Kenya, Ghana, and many other countries. So, we are really creating the awareness gradually and we will speed it off with short seminars from time to time
What about those that may want to abuse this?
That is why I said that the workers are professionals. There are also legal procedures for establishing it. You know in addition to that, nothing prevents the bank from collecting some form of guarantee or security, the only difference is that if you default and you have your security with the bank, penalty is charged if its installment payments and then that particular penalty will have to go to charity. The bank does not take it because penalty on loan is not allowed for the bank.
Can’t IDB help Nigeria with funds?
Islamic Development Bank is not really a global institute of Islamic banking. It’s a development bank concerned with all developmental issues of its member countries. Certainly, one of the things it does is supporting the financial sector, mostly Islamic finance and it will interest you to know that IDB has opened a regional office in Abuja. So, if Nigeria approaches it, especially within an area of focus, it will help. Already, IDB is doing a lot in Nigeria on infrastructure development partnership and so on. A pronouncement has been made that in June, Nigerian government will issue a sovereign Islamic bond. Am really excited because it will mark a turning point.
Osun state did something like that, which already is an experience to fall back on. So, instead of going to the capital market to get money, or to china or to other organizations on interest, Nigeria can actually raise it domestically using this particular instrument. In addition to providing the government with money for infrastructural development, the involvement of the common man in the process will also empower him. So, it’s going to be about providing for infrastructure development as well as empowering the citizens. It will accelerate our exit of the recession and along the line, Nigeria would be expanding and widening its reach into Islamic finance.
The use of Islamic or Arabic terms scares away the Christians. Is there anything you can do to make it general?
Yes and that is why the Central Bank of Nigeria called it non-interest banking. The only challenge there is that sometimes language can be very problematic. So, what we say in English are rough meanings, not exactly and you know that every field has its own concept. But apart from the Arabic words, there is always a translation in English and other languages but Arabic meaning gives a more comprehensive explanation of the issue.