Conventional banks and other financial institutions can offer or sell Sharia-compliant products and services through subsidiaries or branches. The Central Bank of Nigeria (CBN), in a circular dated January 13 titled, ‘Framework for the Regulation and Supervision of Institution Offering Non-Interest Financial Services’, said that such non interest subsidiary shall be established in line with the licencing requirements for the establishment of a fully fledged non-interest bank or financial institution.

“Similarly, a non-interest window or branch of a conventional bank or financial institution shall be established and operated in line with the guidelines on windows/branches issued by the CBN.”

The guideline covers banks or subsidiary, microfinance banks or subsidiary, development finance institutions, primary mortgage institutions and finance companies registered to offer such services. The objective of the framework is to provide minimum standards for the operation of institutions offering non-interest banking and financial services in Nigeria.

Bowing to demand

The Central Bank said that it was bowing to demand from interested parties in releasing the guideline.

“Given the increasing number of requests from persons, banks and other financial institutions desiring to offer Sharia compliant products and services in Nigeria, the CBN has developed this framework on non interest banking and other financial services,” it said.

The Central Bank added that such non interest financial institutions are required to establish a Sharia advisory body as part of their governance structure to be known as “Sharia Advisory Committee” (SAC), which shall operate as an independent body, with the principles of competence, confidentiality and consistency properly enshrined in its operations.

“It is expected that an independent SAC will command public confidence, thereby promoting the growth and development of the industry,” it added.

Non interest financial institutions refer to banks or other financial institutions under the purview of the CBN which transact banking businesses, engage in trading, investment and commercial activities as well as the provision of financial products and services, in accordance with Sharia principles and rules of Islamic commercial jurisprudence.

Transactions, instruments and contracts under this type of services are non-permissible if they involve interest, uncertainty or ambiguity relating to the subject matter, terms or conditions, gambling, speculation and unjust enrichment and exploitation or unfair trade practices, the circular said further.

“Other non-permissible transactions include dealings in pork, alcohol, arms and ammunition, pornography and other transactions, products, goods or services which are not compliant with Sharia rules and principles,” the circular added.

There has been mixed impression about the place of Islamic banking in Nigeria. However, the country has not been able to tap into the global Islamic funds market currently valued at $750 billion, and is expected to grow exponentially every year.