Nigeria: Deposit Insurance Corporation to Develop Insurance for Non-Interest Bank

July 31, 2010

Nigeria Deposit Insurance Corporation (NDIC) has said that it is developing a deposit insurance framework for the operation of non-interest (Islamic) banking in the country.

Central Bank of Nigeria (CBN) is also developing framework for the regulation of non-interest banking and Islamic financial institutions.

The proposed Islamic banking in Nigeria – Jaiz Bank – will commence operation before the end of this year, its Managing Director/CEO Mohammed Mustapha Bintube has said.

Islamic Finance Working Group of Nigeria visited NDIC, Securities and Exchange Commission (SEC) and Debt Management Office (DMO) yesterday in Abuja to work out modalities for the commencement of non-interest banking in the country.

Acting Managing Director of NDIC Ibrahim Umaru said the Corporation will work with the team for the speedy commencement of Islamic Finance in Nigeria.
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“You need to have appropriate legal framework for it. You need to develop compliance. You need to educate consumers who would want to avail themselves on the opportunities of non-interest bank”, Umaru said.

Current operators of non-interest banking in Nigeria include the Standard IBTC, Bank PBH, Diamond bank and the proposed Jaiz Bank.

“All stakeholders are working together to make sure that non-interest bank or Islamic bank takes off successfully in Nigeria. We have challenges in policy framework, on capacity building and on customers orientation”, Jaiz’s MD said.

He said they are visiting regulators so that Islamic and non-interest banking can be strengthen in Nigeria to be able to compete favourably with other countries like Egypt and South Africa.

He said the reason why Jaiz Bank is slow in commencing operation is because there is no compliance instrument for Islamic finance or non-interest banking in Nigeria.

“The second reason why we have not started is that the share size of the capital was increased from N2 billion to N25 billion and therefore the level of risk has increased significantly and people did not want to take bigger risk on something that is new”, he said.

“All these obstacles are been taken care off and before the end of the year you would hear good news from CBN on the JAIZ operation”, Bintube said.