The House of Representatives on Thursday mandated its Committee on Banking and Currency to look into the possibility of Nigeria Banks operating non-interest banking.
A member, Rep. Kabir Ibrahim Tukura, moved the motion, titled: “Need for Banks to Adopt Non-Interest Banking (NIB) System to Stimulate the Economy”
The lawmaker while moving the motion said: “The House notes that non–interest banking, also known as Profit and Loss Sharing (PLS) banking system prohibits the payment of interest in all ramifications and then adopts the principle of profit and loss sharing between the parties;
” Also notes that under non–interest banking, both the investor and the entrepreneur are seen as partners, thus when profit or losses are made, same is shared according to the formula that reflects their level of financial participation;
“Further notes that non-interest banking encourages asset banking as financial transactions are tied to tangible assets like real estate investment or investment on goal, which usually appreciates over time and does not depreciate.”
He said conventional banking is an interest-based system whose relationship with their customer is that of creditor and borrower, where interest is fixed in advance and risk or loss is only incurred by the borrower.
“Also concerned that a large number of Nigerians, especially those from the Northern part of the country, do not take loans with interest due to religious concerns, which thus short changes them from benefitting from Federal Government policies and stimulus packages and is constituting one of the major reasons for the slow economic growth of the region;
” Further concerned that Nigeria’s lending rate, in conventional banking, is one of the highest in the world, and creates serious hardship, particularly on low–income earners, most especially in this period of the COVID–19 Pandemic;
“Disturbed that with higher interest rates, interest payments on credit cards and loans are more expensive, consequently discouraging people from borrowing and spending with the attendant decrease in consumption;
“Cognizant that the Central Bank of Nigeria, which is the apex regulatory body for banks and other financial institutions has not done enough in encouraging non-interest banking which would provide another palliative measure in this season of COVID–19 Pandemic”.
The lawmaker said cognisance should also be taken of the fact that few commercial banks that embraced non-interest banking have made profits with high returns to the investors and at the same time, created better opportunities for access to funds for business purposes with very low risk.
The lawmaker said the Green Chamber should urge the Federal Ministries of Finance, Agriculture and Commerce to provide a deliberate policy that will encourage the Bank of Industry (BOI), the Bank of Agriculture (BOA), Nigeria Incentive-Based Risk Sharing system for Agricultural Lending (NIRSAL) Micro Finance Banks and other Government owned Financial Institutions to provide non-interest banking to their customers;
He also said the resolution should urge the Central Bank of Nigeria (CBN) to review its current policy on non-interest banking and direct Federal Government Development Bank and Commercial Banks to integrate same into their systems; and
mandate the Committee on Banking and Currency to ensure compliance.
The prayers also included that the House further urge the Central Bank of Nigeria to review its policy on non-interest banking to allow Commercial Banks carry it out as a product rather than having to acquire a separate license for non-interest banking as is obtainable currently.
The motion was however amended by the Minority Leader, Rep. Ndudi Elumelu and were eventually collapsed into one which is that: the House Committee on Banking and Currency be mandated to look into the possibility of Nigeria Banks operating non-interest banking.
