Islamic banking in trouble

 … as
low patronage threatens operations • It’s too early to conclude –CBN

Operation of the Islamic or
non-interest banking model in the country, which commenced early this year,
appears to be in jeopardy as the only Islamic banking institution in the
country, Jaiz Bank Plc, has continued to record poor patronage even in the North,
which should ordinarily be its strong hold.

 Reports coming in from both
Abuja and Kano, where the bank has its branches, indicate that awareness of the
bank’s operations and patronage are both on the low side, a situation which
industry watchers believe can spell trouble for the premier Islamic banking
institution and by extension, the noninterest banking model.

For instance, in Kano, where
there is a large presence of Muslim faithful numbering about 8 million, forming
a huge potential market for the bank’s products, banking hall traffic in the
only visible branch of Jaiz Bank is very lean.

Sunday Mirror investigations carried out on Friday, in
the ancient city, which is the North’s economic nerve center, suggested that
the bank is yet to find its bearing in the bustling city, although its
structure located on Tafawa Balewa Road speaks of fine and expensive taste. The
edifice, which also accommodates two regular commercial banks – Zenith Bank Plc
and Fidelity Bank Plc – is still undergoing a facelift.

Visits to the building revealed
that Jaiz Bank recorded virtually insignificant traffic unlike its neigbouring
commercial banks going by the volume of traffic in their respective banking
halls. It was actually difficult to know that the bank’s section of the building
was one that interacts with members of the public on account of the very light
traffic.

Industry watchers have
expressed concern that with the patronage required to make a profitable outing
being seemingly low, the bank may find it difficult to stay afloat. One
concerned businessman, who spoke on conditions of anonymity, expressed doubts
over the future of the banking model.

Equally, Investigations by
Sunday Mirror indicated that awareness about the existence of the bank among
small- and mediumscale trading and commercial entrepreneurs in the Federal
Capital Territory (FCT), Abuja, remains low.

For instance, a trader in
Lugbe, a satellite town in the FCT, who simply identified herself as Mummy
Keji, said she would have been patronising the bank given the interest-free
loan policy if she knew more about its location.

“Some of us hear about the bank
but we don’t know where they are located in Abuja. For me, if I knew where they
are or if they establish branches near us, we can easily do business with them,”
she said.

However, Head, Corporate
Communications Department of Jaiz Bank, Alhaji Idris Salihu, debunked the
reports of poor patronage, insisting that the level of patronage of customers
had been “amazing and that this shows clearly that Nigerians have come to see
the immense value Islamic banking is set to add to the financial system.”

He noted that as a regional
bank, Jaiz Bank’s performance had been impressive in terms of branch network,
customer base and other operational parameters.

He explained: “I must say with
all sense of modesty that the acceptance of Islamic banking, which our bank is
pioneering in the country, has been amazing. Customer patronage has been
impressive since we started in January.

“We are attending to the needs
of customers irrespective of their religious, ethnic or cultural backgrounds.
We have been doing this for all customers in the past eight months we have been
operating.

He continued: “As at today, we
have established branches in Kano, Kaduna and Abuja. This branch network growth
is good for our business as a regional bank. We are planning to establish eight
more branches before the end of the year. All this shows clearly that Jaiz Bank
is growing and we give all the glory to God.”

Commenting on the development,
spokesman for the Central Bank of Nigeria (CBN), Ugo Okoroafor, said it was too
early to conclude that the Islamic banking model was not doing well. While
speaking in a telephone chat with our correspondent yesterday, Okoroafor said,
“Let us wait for the bank’s results then we can conclude whether they are doing
well or not.

He maintained that the model
had barely commenced, insisting that there are several components in the
Nigerian financial system that need to be included in policy considerations.
“For some people, that (Islamic banking) is the kind of banking they desire and
you have to include them in the system for the purpose of financial inclusion.”

He argued that he saw no
problem with the model, which needed the necessary support of all stakeholders.