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Non-permissible income is untouchable

The concept of Islamic banking and finance in Nigeria has been a long and tortuous journey. But notwithstanding the initial challenges that beset Islamic banking operations in Nigeria, JAIZ bank remains proactive and innovative towards customers’ needs. It upholds best practices in its operations and is customer-centric.

Since it pioneers Non-Interest Banking in Nigeria, the bank’s operation continues to deliver world-class sharia-compliant financial services to clientele irrespective of class, creed, race or religious belief; thus, contributing to the socioeconomic development of Nigeria.

Abdulfattah Olanrewaju Amao, the Executive Director, Business Development, heads the Business Development Directorate of the Southern Region of the bank. He is a Fellow of the Institute of Chartered Accountants of Nigeria (ICAN) and an Associate member of the Chartered Institute of Taxation (CITN). He is a shrewd professional banker, astute strategic planner and an executor. Amao is well-versed in both Islamic and conventional banking business models. He is skilled in Talent Management, Strategic Networking and Excellent People Management, among others.

In this interview with Abdulfattah Abdussalam in Lagos, Abdulfattaf O. Amao explains the operational activities of the bank in a capitalist economy such as ours.

The Excerpt:

In a Capitalist economy like ours, how successful is the foray of JAIZ Bank into Nigeria’s banking sector?

Yes, we are mindful that Nigeria’s banking sector is a capitalist environment; nonetheless, JAIZ Bank, being the pioneer non-interest bank in Nigeria, is a business venture that focuses on providing banking services to the generality of people and organizations in line with the principles of Islamic Sharia Law. JAIZ Bank is over 10 years in operation and true to the aspirations of its founders, it has been able to contribute meaningfully to the development of the Nigerian economy in a sustainable manner, even though Nigeria is a capitalist economy. Within the first ten years of operation, the bank has financed cumulatively different businesses, enterprises and individuals above 0.5 trillion (500 billion) Naira and that is no joke in the Nigerian economy. A breakdown of class performance into different sectors portray that we had financed over 30,000 micro, small and medium enterprises across different businesses and sectors. In the housing sector, through partnership, we have made modest contributions. We have been able to facilitate the delivery of over 20,000 housing units, 7000 shops and warehouses in different parts of the country to Nigerians. We have also participated in Sukuk financing as a major investor. Sukuk is an Islamic instrument that is similar to bonds in the conventional space. Through Sukuk, the Federal Government constructed more roads, with solid materials; thus, providing seamless transportation of farm produce to the markets and enhancing other services delivery. At the end of the day, the GDP of the country is positively affected. At the 2nd quarter of 2022, our balance sheet size had grown to three hundred and thirteen (313) billion Naira, from an initial modest 12 billion Naira that we started with in 2012. Other performance indices like: profit before tax, return on equity and others have also been very impressive. In 2021, we were able to deliver 4.4 billion in profit before tax and it was a remarkable improvement compared to year 2020. The growth trajectory in JAIZ Bank has been in that realm consistently. In essence, this gives beams of confidence to the owners and managers of the bank that it has come to stay through the implementation of unique model in a capitalistic Nigerian economy, notwithstanding.

These are impressive developments. But how much of the JAIZ profits go into Corporate Social Responsibility?

We embark on Corporate Social Responsibility through two areas of interventions. One of such is commercially oriented where the bank moderates its return on its transactions as a way of giving back to the society; though not at full commercial rates. This may not necessarily produce fantastic profits for the bank. For instance, we have been very strong in empowering women in the rural areas of Nigeria. We set up a partnership scheme with women, attend to them in clusters, provide their financing needs and they run their businesses. Profit or loss arising from the scheme is shared by both parties. JAIZ has conducted over 10,000 transactions with these women in this regard. The bank is also proud to have been part of the fund intervention schemes of the Central Bank of Nigeria (CBN) for micro, small and medium enterprises, via the introduction of variants of Sharia-compliant products. Many businesses in the agricultural and manufacturing sectors have been able to access loans at relatively low rates which also helps build their businesses, compete better and by extension, contribute to the growth of the economy. These are two examples out of several others under the first category of CSR that we do. The second category is donations to charitable causes; and I guess, this is your area of interest. The bank sometimes directly donates to individuals and organisations that deserved the donations. Also, there is the JAIZ Foundation which is the creation of the bank. Independently, the Foundation, in addition to what the bank gives, can touch the downtrodden at the bottom of the pyramid and lift them through different empowerment schemes. The bank has truly done well in its CSR and of course, the bigger the capacity of the bank, the bigger we shall do more.

How about Corporate Religious Responsibility (CRR), do you have such in JAIZ Bank?

 (Chuckles) This is an interesting one! Yes, this is an institution that runs on Islamic banking principles, but when it comes to the choice of customers we do not worry about the faith of the customers we are dealing with, rather, it is about what they do. When it comes to CRR, other than meeting Muslim communities and sensitizing them on the lifetime opportunities JAIZ brings to their doorsteps, it builds the right capacity and unleashes their potential in an environment that resonates with their faith; we do not operate in that pedestal. 

However, there is an ancillary company that largely executes such CRR and that is done under JAIZ Foundation.

How prepared is JAIZ Bank for competition in the wake of new entrants?

In JAIZ bank, their entries is a sign of a good omen and of course, is highly welcomed. Alhamdulillah, we started the Islamic banking operations in Nigeria over 10 years ago. The inception of  new entrants confirms that we are doing an impactful business that attracts others. Today, we now have four full-fledged non-interest banks, with the other two having window licenses. This signals that we are creating an industry, a competitive environment and thus, making the industry sustainable. Islamic Banking operation in Nigeria is no longer a solo business for us, but we don’t see them as rivals. In this situation, the customer is always the winner because he has more choices. In addition, the environment gives room for more collaborations and cooperation with one another as multiple players. Therefore, we see their entries as advantageous and we are in the best stead to continue to improve our service deliveries. JAIZ had long expected their foray and we have a blueprint that strategically positioned us to compete favourably in the industry by keeping us ahead. The fact that there is competition keeps us on our toes and we are ready to have our customers sentimentally attached to what we offer. I would like to seize this opportunity to appreciate our team and customers, for their patronage and support over the years. They are usually very excited about the unique value proposition that we bring to the table. They see JAIZ as a credible alternative to what they had been used to over the years. 

Do you think the Ummah can sustain the human capital needed in the sector?

Thank you, this is a good question! The answer is a yes but there are still challenges to be surmounted in capacity building. JAIZ has a full-fledged academy where it trains people in Islamic Finance and that is why JAIZ-trained staff footprints are in most new Islamic banks in the industry. In addition, some universities in Nigeria have started offering courses in Islamic finance, even at Masters Levels. However, the stakeholders have to make concerted efforts to continue the training of people towards building human capacity in both theoretical exposure and practical terms. Invariably, if that is done, it will build the capacity required shortly to deliver cut-edge service delivery in the sector. Some foreign universities and institutions of learning also offer virtual certificate courses in Islamic banking. From the comfort of your homes you can take courses in this area and get to have the technical know-how with time.

Sir, JAIZ Bank keeps money with the CBN. Is it non-interest? 

Being a licensed bank that operates non-interest banking in Nigeria does not take us away from keeping what we call reserves with the CBN. This reserve is a compulsory element of the practice and CBN does not pay any interest on such. It is called cash reserve requirement which is one of the tools that the CBN uses to manage liquidity in the system. It is what you keep there that is there, whether you are an Islamic bank or a conventional bank. So keeping money with the apex bank does not negates the principles of Islamic banking.

How does JAIZ Bank manages non-permissible income in its operations?

Non-permissible income needs to be expatiated before explaining whether it is management or disbursements. The peculiarities of the business that we do are for us to be lenient with customers in line with the Sharia principles, but some customers may want to take undue advantage of that and might run the Bank aground.  Therefore, the regulatory body has to find a means to mitigate that. So, it came up with a penalty charge for defaulting customers. The concept of non-permissible income operates where an individual or corporate customer has been found wanting in meeting repayment obligations on facilities extended to him or the corporate entity. The bank is allowed to award a penalty fee, to discourage bad credit behaviour. Mark you, the bank tends to lose if a customer defaults and JAIZ has to be using other depositors’ funds to fund the default. The longer it takes, the higher the loss on the transaction. So, to discourage that kind of attitude from a customer, a penalty charge is enforced. Its management is in line with the Central Bank regulation through the Financial Regulators Advisory Committee of Experts of CBN, (FRACE). Where that penalty is applied, the penalty proceeds are warehoused in an account under the supervision of CBN. The bank sends periodic reports to CBN on what has been collected. Ultimately, the collected money is used for charity purposes; the bank is not permitted to use it for its benefit in any way. Thus it is called non-permissible income and strictly for charity. It is untouchable income. Thank you very much for this question, it helps to educate our customers and stakeholders in the sector. The bank does not earn a Kobo out of the accrued fines.

How often does FRACE come around to check on the bank’s operations? 

Well, FRACE does not operate like an audit firm, but statutorily, there is no product that we want to introduce or launch to the market that will not have FRACE’s approval. The way it works is that as a bank, we operate under the guidance of an Advisory Committee of Experts ACE, which would vet, review and sanction any product that we want to introduce from the Shariah compliance standpoint. Once we are done with our own internal ACE, we go to FRACE for their final approval. The FRACE only interfaces with the Bank through ACE, although we file returns to it to be sure that we are operating in line with the laid down rules and regulations. Whenever there are issues of dispute on the interpretation of the principles of Sharia that guide our operations between the bank’s Management and ACE, FRACE also intervenes.

What mechanisms are there in JAIZ to address customers’ complaints?

We have a wide range of platforms through which our customers can reach out to us. The most popular is the already known Customers’ Desks in the branches. Today, we have over 40 branches spread across different parts of Nigeria. As our customers interface with these branches, they lodge complaints and get prompt resolutions. We also operate a 24/7 contact centre, so that customers can reach us anyday, anywhere and at any time. We also have our social media handles and website where complaints can be lodged. We have internal mechanisms for tracking and monitoring these complaints to avoid unsavoury reports on our operations to the Central Bank of Nigeria. Let me, at this juncture, assure our customers that we work day and night towards ensuring that we exceed their expectations. The hallmark of our service delivery is to spare no efforts for their comfort, satisfaction and convenience, as they aspire to access JAIZ Bank services.

How do you think we can curb the current rate of inflation in the country? 

It is a difficult one, now. What we’re going through as a country, as we all know, is that the inflation rate has been on the rise, month on month. Economic experts have predicted that it is likely to rise above 20%. What needs to be done, is to examine the causes of inflation in the country and address them squarely. Two major causes come to mind: one is the fact that we are a highly import-dependent economy and as such, we put pressure on the little foreign means of exchange available – the dollar. Nigeria does not have enough because its revenue has been challenged in the last couple of years. Secondly, the massive infrastructural development on-going in the country is another factor. Maintenance of these infrastructures and the construction of many come with a high inflation tendency. Thus, we need to be a lot more deliberate in providing alternatives to the importation that we do. For instance, with Dangote Refinery afloat and the value chain opportunities in its line of bussines hopefully, it will translate into some moderation in the demands for dollars. Removal of the fuel subsidy, although it shall inflict pain on people, is the best way to go. It will reduce pressure on Fx demands, and reduce money in circulation. The economy is aching seriously on the issue of subsidies. Yes, it might be a very painful thing to do. That is just the reality; the current subsidy regime is unsustainable. The World Bank has said the same thing many times, renowned economists have also expressed a clear view on this, and this is just commonsensical. You know, because all we are subsidizing is consumption, not production.

Sir, which is more of interest: Islamic Banking or Conventional Banking?

Aha (chuckles). There is no argument at all. I thank Allah Subhanahu wa ta’ala for granting me the privilege of working with the pioneer Islamic bank in Nigeria. This is where I belong exactly without an iota of doubt. I mean, this is what I had always dreamt of – a day that I will have this opportunity to be part of Islamic banking and live my life in line with Allah’s commands on financial matters. Islamic banking is of interest, it is not all about money but about putting smiles on the faces of people. I cannot quantify the amount of joy that I derive working with JAIZ Bank and that makes it a special place of my interest. 

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