‘Non interest banking open to all Nigerians’

 

Mahe Abubakar is the Deputy Managing Director of Jaiz Bank Plc, which has the pioneer status of being the first nationalised non-interest banking financial institution in the country. In this interview with Assistant Editor Nduka Chiejina, he comments on the long-held stereotypes and misconceptions about Islamic banking vis-à-vis the benefits and investment opportunities inherent in non-interest banking for prospective local and international investors. Excerpts:

The Central Bank of Nigeria recently issued a national license to Jaiz Bank Plc. What does this mean to you and the bank in particular?

The national license means a lot to us. We have worked tirelessly for it and thanks to the support of the apex bank through their advice and direction, we now have it. We are grateful to Almighty Allah. It is indeed a milestone achievement. It is also an opportunity for us to extend our unique brand of banking to all Nigerians. We have commenced the first phase of our roll-out with branches in Lagos, Port-Harcourt, Ibadan and Ilorin and very shortly, we will be in all the states of the federation.

A national license requires additional and huge investment and capital, have you made adequate provisions in this direction?

As a specialised non-interest bank, you only need a capital of N10 billion to be a national bank and Jaiz Bank has had this as far back as 2012 when we commenced operations. However, there were certain requirements that we were not able to meet at that time. We are grateful that this is now behind us. Recently, we had course to do a rights issue, which is raising our capital to N15billion. I’m happy to say that the exercise was concluded successfully as we were oversubscribed by about 3%.

Our target is to raise the capital base to N25billion before the year runs out. This will be unveiled as soon as we have the nod of the regulatory authorities. I believe this will position us to compete efficiently in this highly competitive sub-sector of the economy.

As a new platform offering Islamic non-interest bank, do you foresee challenges in terms of penetrating some Southern states in the country where there is limited enlightenment on how you operate?

Well, there could be challenges due to lack of enlightenment as you mentioned. But Jaiz Bank is already a national bank in character because most of our customers are from all over the country. Our staff cuts across all the geo-political zones of the country and from all tribes and religions. So also are our shareholders. It is really not very difficult, only that there are some people that misunderstand the concept of non-interest banking. It is an alternative form of banking based on a principle of non-interest, sharing of risk and rewards, equity, fairness and justice. Some people believe because it is called Islamic banking, we are into Islamic propagation. No. It is a business that is mainly guided by Islamic jurisprudence. Of course, it is open to all Nigerians irrespective of their religion affiliations and leanings.

We acknowledge the fact these challenges exist due to lack of knowledge, but we have equally mapped out a detailed communication strategy to address it. We only recently launched an advertising campaign consisting of print, electronic and outdoor. We intend to maintain the momentum.

Do you think the products you offer are enough to convince the new entrants that they would get value for their investment?

I’m sure you know that we are only four years in operation. In our third year we broke-even and made a modest profit of about N126million. In the following year, we made profit of over N800million. That tells you that we are a very profitable venture and I know Nigerians are people that are highly analytical. They would analyse and see our value proposition.

The challenges we have mainly is that of liquidity management. If you have some deposit and you don’t invest you don’t earn income naturally. This is different from the conventional mode where the reverse is the case. Be that as it may, we have arrays of products that cater for different segments of the society.

Now that you have a national license, how soon do we expect branches across the country?

Like I mentioned earlier, we have already rolled out four branches in Lagos, Port Harcourt, Ibadan and Ilorin which will be opened soon. We will after this move very quickly move to other states of the federation. So, we are on course.

Some conventional banks also operate some form of non-interest services, what exactly differentiates your bank from the others?

Actually, what some of the conventional banks have is just Islamic banking window. They got license from the CBN to open Islamic non-interest banking window which is at par with their conventional banking activities. At Jaiz Bank, the difference is that we are a full-fledged non-interest bank. We don’t co-mingle. We are strictly Sharia compliant unlike others.

As the bank is expanding are you also considering expanding your staff strength and other logistics as well?

Yes. The national license would open more employment opportunities for young Nigerians and also give us or open up more alternative source of funds for businesses. As a matter of fact, we are better placed to promote the CBN policy on financial inclusion.

You are about six months in office now. What improvements have you brought into the system in terms of your leadership style?

My predecessor had over three decades experience in Islamic banking. I have gotten over two decades experience in conventional bank, but what I have learned in terms of Islamic banking in the last two years that I joined Jaiz Bank I can say are very valuable. For the past six months, we have been able to raise the deposit of the bank by about 30%. Besides, we have been able to raise the investment level by about 16% and equally been able to grow the balance-sheet by more than 25%.

Apart from that, we have been able to bring down the cost of running the bank by about 20%. To me that is a modest achievement. We have also opened our training centre in Zaria, which has been in the pipeline for a long time. We are now building the much needed capacity that is lacking in the area of Islamic banking and finance.

Many banks are having difficulties in managing forex, how do you manage your forex?

Actually managing forex in Nigeria is all about prioritisation. It is about knowing what is important and doing them and discarding those that you don’t need. That is what we do at Jaiz Bank and I believe that is what other banks are also doing. Nigerians are used to spending, especially abroad without control. The crash in the price of oil should be an eye opener to all Nigerians that life is not as easy as we think it is and we really need to look inwards. A situation where you depend completely on import is not good for the country and our future.

Does Jaiz Bank have SMEs products for customers?

The bank has robust SMEs products. In fact, in our third year of operations, the bank decided to do a pilot SMEs project and N500million was earmarked for that. Apart from that, we also made attempt to partner with SMEDAN so that we could bring in more people to access SMEs products in the bank. A lot of people have done so and we still have a lot of opportunities for other people in that direction. We are stepping up our enlightenment so that people can take advantage of this opportunity.

There are some intervention funds like SMEs and Agricultural Funds from CBN, can people access these funds through Jaiz Bank?

Not at the moment because these fund are interest based. However, we are discussing with the CBN Advisory Committee on Non-Interest Banking, on how we can participate. We are hoping that this will be resolved soon.

Looking at the current economic situation in the country that is characterised by hardship, how would you describe patronage, especially in the area of mobilising deposit?

Well I would say we have managed very well. If you could recall, I mentioned that in the last six months, we were able to raise deposit by over 30%, which means that we could double our deposit in one year which shows there are a lot of potentials for mobilising liquidity. We have a lot of Nigerians that are financially excluded and our bank again is better placed to encourage them to bank.

Besides, the Federal Government is also moving in right direction in terms of its economic policies. I believe that very shortly we will begin to reap the benefits of democracy and good governance.