What are Islamic Banks? List of Islamic Banks in Nigeria: their Origin, Growth and Details

Islamic banking is a system of banking or banking activity that is consistent with Islamic law (Shariah). Islamic law prohibits the payment or receipt of interest (known as riba), which is seen as usury.

Nigeria is home to a number of Islamic banks, each of which adheres to its own distinct framework in accordance with the tenets of Islamic finance.

These guiding principles emphasise fairness, justice, and risk-sharing in an effort to foster financially responsible and ethical behaviours.

Islamic banks instead use profit-sharing and risk-sharing methods to operate.

Todays blog post will cover What are Islamic Banks? List of Islamic Banks in Nigeria: their Origin, Growth and Details.

The Origin of Islamic Banks in Nigeria

Islamic banks in Nigeria date back to the early 1980s, when a group of Muslim scholars and businessmen started exploring the idea of creating an Islamic bank in the country. However, the first Islamic bank in Nigeria, Jaiz Bank, did not open its doors until 2003.

The creation of Jaiz Bank was an important turning point in Nigerian Islamic banking history. It was the first full-fledged Islamic bank to be created in the country, and it cleared the way for the development of Nigeria's Islamic banking industry.

There has been a surge in interest in Islamic banking in Nigeria with the founding of Jaiz Bank. Sterling Bank introduced an Islamic window in 2008, and Unity Bank created an Islamic window in 2011. The CBN licensed two new Islamic banks in 2015: 1st City Monument Bank and Tanmia Bank.

Growth and Details of Islamic Banking

Over the past few years, Nigeria's Islamic banking industry has been consistently expanding. At the conclusion of the first half of 2020, the total assets of Islamic banks in Nigeria reached NGN214.8 billion, which is equivalent to USD 564 million. This represents less than one percent of the total assets held by banks in the country. The Central Bank of Nigeria (CBN), on the other hand, has forecast that the Islamic banking industry in Nigeria might reach NGN1 trillion (USD 2.8 billion) by 2025.

There are a lot of different forces at work in Nigeria that are contributing to the expansion of Islamic banking. These are the following:

●        The growing proportion of Nigeria's population that identifies as Muslim. According to the findings of the Pew Research Center, around 47% of Nigeria's total population identifies as Muslim. This indicates that there is a significant potential market for the products and services that Islamic financial institutions offer.

●        The increasing awareness of Islamic banking practices among Nigeria's Muslim population. Muslims in Nigeria have shown a growing interest in Islamic banking in recent years, which has led to increased knowledge of this financial system. This is due to a number of causes, some of which include the rising availability of knowledge about Islamic banking, the expanding number of Islamic banks and windows in Nigeria, and the support that the government provides for the development of Islamic banking.

●        The backing of the Nigerian government towards the expansion of Islamic banking in the country. The establishment of Islamic financial institutions in Nigeria has received encouragement and assistance from the Nigerian government. The Central Bank of Nigeria (CBN) published a guideline on Islamic banking in 2005, and in 2015, the CBN authorized the establishment of two new Islamic banks by issuing licenses to them.

●        The rising demand for financial goods and services that are in compliance with Shariah is another factor that is propelling the expansion of Islamic banking in Nigeria. Muslims are becoming more educated about the advantages of Islamic banking, and as a result, they are putting more pressure on their financial institutions to provide goods and services that are in line with Shariah law.

The industry of Islamic banking in Nigeria is still in its early phases of growth; nevertheless, it has the potential to grow greatly in the coming years due to the country's increasing acceptance of Islamic finance.

The expanding number of Muslims in Nigeria, the increasing knowledge of Islamic banking, and the assistance provided by the government for the development of Islamic banking are all factors that are anticipated to be beneficial to the business.

The following is a list of some of the details regarding Islamic banking in Nigeria:

The Islamic banks in Nigeria provide their customers with a wide range of goods and services, including the following:

●        The most recent accounts

●        accounts for saving money

●        Term deposits

●        Murabaha (cost-plus finance)

●        Ijara (lease)

●        Mudharabah (profit-sharing partnerships)

●        Musharaka (joint ventures)

List of Islamic Banks in Nigeria

Here are the list os Islamic Banks in Nigeria:

Jaiz Bank

Jaiz Bank is the first and earliest Islamic bank in Nigeria. It was established in 2003 and commenced full operations in 2012 after obtaining a license from the Central Bank of Nigeria (CBN). Jaiz Bank offers a range of Sharia-compliant banking products and services to individuals, businesses, and institutions. Its headquarters is located in Abuja, Nigeria's capital.

Al-Barakah Microfinance Bank

Al-Barakah Microfinance Bank is another microfinance institution in Nigeria that operates on Islamic finance principles. It provides microfinance services to entrepreneurs and small-scale businesses, aiming to alleviate poverty and promote financial inclusion. Al-Barakah Microfinance Bank offers Sharia-compliant microfinance products, including savings accounts, loans, and investment opportunities.

Taj Bank

Taj Bank is a relatively new Islamic bank in Nigeria, established in 2019. It aims to provide ethical and innovative banking solutions to its customers. Taj Bank operates based on the principles of Islamic finance, offering services such as current accounts, savings accounts, investment accounts, and trade finance solutions. It has its headquarters in Abuja.

SunTrust Bank

SunTrust Bank is a commercial bank in Nigeria that offers Islamic banking services alongside conventional banking. It obtained a license from the CBN in 2015 to operate as a full-fledged commercial bank. SunTrust Bank primarily provides Sharia-compliant banking services such as current accounts, savings accounts, investment accounts, trade finance, and treasury services.

Lotus Bank

Lotus Bank is yet another prominent Islamic financial institution in Nigeria. It was established in 2017 and is committed to providing ethical and Sharia-compliant banking services. Lotus Bank offers various products and services, including current accounts, savings accounts, investment accounts, trade finance, and treasury services. The bank's headquarters is located in Lagos, Nigeria's commercial hub.

Coronation Merchant Bank

Coronation Merchant Bank is a leading financial institution in Nigeria that offers both conventional and Islamic banking services. The bank established its Islamic banking arm known as Coronation IB in 2014 to cater to the growing demand for Sharia-compliant financial products and services. Coronation IB provides Islamic banking solutions, including trade finance, treasury services, and investment advisory.

Jabeer Investment Company Limited

Jabeer Investment Company Limited is an Islamic finance institution in Nigeria. It operates as an investment company, providing capital and investment opportunities to individuals and businesses in compliance with Sharia principles. Jabeer Investment Company Limited offers investment advisory services, project financing, and venture capital funding.

Halal Investment Limited

Halal Investment Limited is an Islamic finance company that specializes in halal investment opportunities. It offers various investment products and services, including real estate investment, equity investment, and commodity trading. Halal Investment Limited aims to provide ethical investment options in line with Islamic principles.

TrustBank Takaful

TrustBank Takaful is a subsidiary of TrustBank Plc, a commercial bank in Nigeria. TrustBank Takaful offers Takaful (Islamic insurance) products and services to individuals and businesses. It operates based on the principles of mutual cooperation and risk-sharing. TrustBank Takaful provides coverage for life, health, motor, travel, and other types of insurance.

FAQs

What is the difference between Islamic banking and conventional banking?

The main difference between Islamic banking and conventional banking is that Islamic banking prohibits the payment or receipt of interest (riba). Conventional banks earn money by charging interest on loans, while Islamic banks earn money by sharing in the profits or losses of their investments.

Is Islamic banking legal in Nigeria?

Yes, Islamic banking is legal in Nigeria. The CBN issued a guideline on Islamic banking in 2005, and the first Islamic bank in Nigeria, Jaiz Bank, was established in 2003.

Who can use Islamic banking services?

Islamic banking services are open to everyone, regardless of their religion. However, Islamic banks do not offer interest-bearing products, so they may not be suitable for everyone.

Which is the first Islamic bank in Nigeria?

The first Islamic bank in Nigeria is Jaiz Bank Plc. It was established and is headquartered in Abuja. Jaiz Bank offers a variety of Islamic banking products and services, including current accounts, savings accounts, term deposits, and financing.

Which bank is owned by Muslims in Nigeria?

There are no banks in Nigeria that are solely owned by Muslims. However, there are a number of banks that have a significant Muslim customer base, including Jaiz Bank, 1st City Monument Bank, and Tanmia Bank.

Conclusion

Islamic banking is a growing industry in Nigeria, and it is likely to continue to grow in the coming years. Islamic banks offer a variety of products and services that are consistent with Islamic law, and they are open to everyone, regardless of their religion.