Speaking exclusively to NEXT in a telephone interview, Mr Sanusi said he has examined all of the criticisms that has trailed the initial guidelines issued and is satisfied that the wording could give the impression that Islamic banking is the only type of non-interest banking that is allowed.
The governor went further to say that with the new guidelines in place, “anyone who wants to practice non-interest banking that is non Islamic will be free to apply for a licence and the CBN would accordingly issue guidelines for that type of banking. “The guideline we have issued are for Islamic banking as one form of non- interest banking and do not intend to restrict the definition of non- interest banking. Islamic Banking is now an acceptable product worldwide with its rules and regulations. What we have issued is consistent with international regulatory standards. Mr Sanusi added.
This news is likely to be greeted with relief by those who had accused the CBN of issuing guidelines on non-interest banking which were in contravention of the Banks and Other Financial Institutions Act (BOFIA), which regulates operations in the financial services industry.
Chief executive of Pharez Consulting, Eghes Eyienyen, said the CBN reversal is a positive development which will bode well for the economy. “Non interest banking is an area of banking that can provide alternative capital for those who might ordinarily not have access to capital because of the stringent conditions by banks to grant credit.” He said the CBN should redefine non interest banking in line with the BOFIA as profit and loss sharing bank.
“It should not be defined as Sharia compliant or Islamic banking or compliance to Islamic jurisprudence. It should be defined as profit and loss sharing banks according to section 61 of BOFIA.” Mr Eyienyien however said the CBN should roll out a uniform guideline that would set the ground rules and would be applicable to all operators irrespective of religion. “For instance, under what guidelines was Lotus Capital operating. What was the extra ordinary need when somebody was already practicing Sharia banking? The company had been doing business rolling out Islamic banking products. It is a free country. What was the need for CBN to come out with the Sharia banking guideline?
Mr Eyienyen said the non- interest banking guidelines should be more concerned with the issue of minimum capital, licensing requirement and put in place a code of corporate governance. “The peculiarity of non interest banking means that the corporate governance code needs to be stricter. The risk management structure must also be strong. If you grant facility on a profit and loss sharing basis, you have no recourse to the person if the project fails which is why it must ensure that its risk acceptance criteria are very strong so they don’t put their shareholders fund in jeopardy.” He said the CBN guidelines must spell out accounting, audit and disclosure requirements and prudential guidelines on asset loss provisioning, in addition to capital adequacy ratio and cash reserve ratio.