From Uche Usim, Abuja
When Jaiz Bank PLC, Nigeria’s pioneer of Islamic banking, set sail in 2012, it encountered a tempest that tested its strength. Some Nigerians saw it as one of the vehicles to drive the touted Islamisation agenda that was rife at the time.
But with hard work, focus, determination and enlightenment, the bank, against the odds, sailed to calmer waters where many Nigerians got on board, after understanding the principles of non-interest banking (banking).
Jaiz Bank’s success story has attracted other financial institutions into the non-interest banking space, just as it grew its balance sheet from N12 billion at inception to N300 billion today.
According to the managing director/chief executive officer of Jaiz Bank, Hassan Usman, the financial institution is a quoted public company owned by over 26,000 shareholders spread over the six geo-political zones of Nigeria.
He said the bank worked hard to explain its nature of banking since Islamic banking remains an unfamiliar territory to Nigerians.
A trained accountant, Usman was appointed the managing director in 2016. He graduated with a first class degree in accounting in 1985 from Ahmadu Bello University, Zaria. A fellow of the Institute of Chartered Accountants of Nigeria (ICAN), he obtained a postgraduate diploma in management in 1995 from Maastricht School of Management.
In this interview, Usman revealed that Jaiz Bank has grown its branch network from three to 45 branches nationwide at a 30 per cent growth rate.
He said its profit before tax has grown by an average of about 40 per cent over the last four years, with its customer base reaching almost a million across all sectors.
The journey
It looks like yesterday, but the young financial institution that started small is growing and this has proven that the concept of Islamic banking, which is non-interest banking, can work in Nigeria. Let me emphasize that individuals and corporate bodies have benefited from it.
We started with N12 billion but now our balance sheet has grown to N300 billion. We also grew from a few customers to a million customers today.
We began with corporate offerings but diversified into the micro, small, medium enterprises space. We did that to meet our mission of making life better for Nigerians.
We have in particular touched women’s lives by providing equity for their SMEs and their welfare, considering the role of women in family and nation-building.
We have also provided insurance to cover individuals up to N100,000 per head. It’s revolutionary in the rural areas and even in the cities. We look forward to better days ahead.
We want to grow the business of our partners and, as a bank, it’s one of our operational principles. We have grown from three branches to 45 spread across the geo-political zones.
Islamisation accusation
It sprang from not properly understanding our business model and then lack of information. We surmounted that by continuing to educate people and providing clarity as to what we want to offer as a premier non-interest bank. Today, we now have customers coming in from diverse backgrounds. Our philosophy is to deliver world-class, sharia-compliant financial services to our clientele, irrespective of class, creed, race or religious belief, and to contribute to the socio-economic development of the society. So, our offerings are taken by all. We explained how the bank works and brought in more discipline.
Part of the underlying difference between the conventional banks and us is that, in conventional banks, you can be given cheques to withdraw money. Ours you have to show what the money will be spent on. If you have a business idea, we can finance it.
Even for loans, where we should, we take commercial and financial risks and share them with the customers. Those who come and understand what we do, they never leave us. That is not to say that conventional banks are not doing their jobs or something. It’s just that our nature of banking differs from theirs.
We’re allowed as a non-interest bank to be partners with customers and share the risks. We’ve proved it’s sustainable.
We’ve maintained 40 per cent profitability year-on-year. Conventional banks offer loans and you structure repayment. All our transactions are backed by assets.
Plans for next 10 years
Diversification of business offerings. We have strategic plans, going forward. We also hope to open more branches.
We have been providing ethical services to individuals, corporate and government entities since 2012 with the mission of ‘Making Life Better Through Ethical Finance.’
We have deepened this alternative model of financing, thus providing the foundation for expansion, and providing the needed ethical funding for infrastructural development in the country.
Impact
We have impacted on the economy in many ways. We are involved in housing delivery for Nigerians. We have delivered more than 3,000 houses with our partners.
We’ve pooled funds for various business concerns; N75 billion has been channeled into agriculture. We have been helping to build rice mills and we have done over N60 billion in SMEs and created facilities for 20,000 individuals.
Threats by other non-interest banks
We are not threatened. The fact that more financial institutions are coming in means we did well as a pioneer. Those coming in are collaborators, not threats to us. We actually want more players to come in to sustain this business.
Losses
We’re not immune to non-performing loans (NPLs). We give facilities to thousands of customers, yet we’re conservative in income recognition. We’re part of our customers’ businesses.
We can have a loan default but ensure it’s not so significant.
Insurance
We target rural dwellers. We piloted a programme to pilot equity financing. Not a loan. These people never had access to financial services. We meet with the women’s groups every month. It’s to ensure they’re not exposed to risks like fires, etc. These are the sort of people we work with.
Opportunities
We’ve the biggest market in Africa. This is a basis for development.
Islamic banking
Non-interest banking is a growing global phenomenon practised in nearly 80 countries across the world, including the United Kingdom, Canada, the United States of America, the United Arab Emirates, Malaysia, China, Singapore, South Africa, Kenya, etc. Global banks like HSBC, Citibank, Barclays Bank, Standard Chartered, etc., are also offering non-interest banking products and services.
It is an alternative financial service offering that is open to all, irrespective of race or religion. It is based on the ethical principles of fairness, transparency and objectivity. Non-interest banking offers almost all the services of conventional banks.
The difference is that Islamic banks do not give or receive interest, nor finance anything that is harmful to the society, like alcohol, tobacco, gambling, etc. They also avoid gharar, speculation, extreme uncertainty and deception. A significant portion of the Nigerian population is desirous of ethical banking services, which Non-interest banking is poised to deliver.
In a nutshell, non-interest banking is real-economy-oriented, where profit and loss sharing arrangement, mark-up, leasing and partnership are mostly the mode of financing.
Awards
Within 10 years of existence, the bank has won notable international and local accolades, among which are the Most Improved Islamic Banking awards in 2020 and 2021, respectively, from the Global Islamic Finance Awards (GIFA).
It is worth noting that the bank maintains the record of being the first Islamic bank in the world to break even within the first three years in operations even when there were no Islamic banking and finance instruments to invest in in the country.