By YUSUF MOHAMMED
Many people may have heard about Jaiz bank but do not really know how the bank operates. There have been several questions asked about the bank. One of the most common questions is: is it for only Muslims? The most common knowledge is that it is an interest free bank. People also wonder how the bank makes its money as interest is considered to be haram (unlawful) according to Islamic banking law.
Jaiz Bank is an Islamic Bank that was created out of the former Jaiz International Plc which was set up in 2003/2004 as a Special purpose Vehicle (SPV) to establish Nigeria’s first full-fledged Non-Interest Bank. It obtained a Regional operating Licence to operate as Non-Interest Bank from the Central Bank of Nigeria on the 6th of January, 2012 with three branches located in Abuja FCT, Kaduna and Kano.
BusinessHallmark gathered that at the core of Islamic banking is non-interest. In fact, another name for Islamic banking is non-interest banking. It is a system that is based on the principles of Islamic or Sharia law and guided by Islamic economics.
Two fundamental principles of Islamic banking are the sharing of profit and loss, and the prohibition of the collection and payment of interest by lenders and investors. Sharia law prohibits collecting of riba (interest).
The origin of Islamic banking dates back to the beginning of Islam in the seventh century. Prophet Muhammad’s first wife, Khadija, was a merchant and he acted as an agent for her business, using many of the same principles used in today’s Islamic banking.
Like all other Islamic bank, BusinessHallmark learnt that financial transactions in Jaiz Bank is culturally distinct form ethical investing. For instance, the bank does not fund businesses that are not accepted in Islam. Gambling, alcohol, pork and other forbidden items in Islam don’t get funding from the bank.
Apart from Nigeria, there are many other countries with Islamic banking, including the United States. There are over 300 Islamic banks in over 51 countries.
At Jaiz bank, bankers turn to learned scholars or use independent reasoning based scholarship and customs. The bankers also ensure their ideas do not deviate from the fundamental principles of the Quran.
To earn money without the use of charging interest, Islamic banks use equity participation systems. Equity participation means if the bank loans money to a business, the business will pay back the loan without interest, but instead gives the bank a share in its profits. If the business defaults or does not earn a profit, then the bank also does not benefit.
Jaiz Bank PLC is a national bank and a quoted company owned by over 26,000 shareholders spread over the six geo-political zones of Nigeria. The Bank’s balance sheet has grown from N12 billion in 2012 to about N62 billion with asset financing of over N30 billion. The customer base has grown to over 230,000 cutting across all strata of the society. Their product offerings have grown substantially ranging from friendly retail to commercial and corporate products.
They have also grown their branch network from three branches in 2012 to 30 branches, spread across the country. More branches are being built to cater for more people who are desirous of this style of banking.
BusinessHallmark paid a visit to one of the bank’s branches on Allen Avenue in Lagos and spoke with the Relationship Officer of the branch, Ismaeel Oyelola,
According to Oyelola, The bank does not discriminate as it is open to people of all faiths. He said, “We are a financial institution that deals with free interest loan. And in Islam interest is what God forbids. Since we are operating under the tenets of Sharia, we just have to abide by what God forbids and what He accepts through Sharia.
“We do more of trading. If a customer approaches other conventional banks and says ‘I need a million naira to do a business,’ they don’t ask what business it is. They just release the funds and tell them what their own interest is.
Here, it is different. If you approach Jaiz bank that you are into sales and consumables and you need a million naira to expand the business, we would like to know what you sell specifically. If you sell food stuff like rice and other items, you need to meet up with our own basic requirements. We don’t give you the money. We pay your vendors directly. We buy those consumables and resell to you.
“For businesses, there has to be tenure. If you say you need the funds, for three months, we will give you one million naira for one year with three months turnaround time. For instance, we give you for January, when it is March you pay us back our own money with our own profit on that one million naira.
For instance by default, our markup profit per annum, which is the highest we go, is 28%. If you are utilizing that fund for three months, it means we will do 28% divided by 12, multiplied by three months. It means you will pay N1 million and 70 thousand naira.
When asked if that is not interest, he replied, “No. Some people say it is interest but it is not.
In other banks for instance, you need a million naira to buy a car and I give you the money, you may decide not to buy the car again. My own concern is just give me my one million naira with my interest on it. But it is different at Jaiz Bank. We buy you the car and sell to you. We follow our transactions to the latter. We have Sharia departments in each and every branch that monitor all our transactions.”
When asked if people of other faiths bank with them, he said, “We have more of them, especially the Igbo. This is because the Igbo are very meticulous with their money. We don’t do COT. No Maintenance charges. Some banks claim they don’t do it anymore, but they still have ways they take money from the customer’s funds. But here we don’t do that.”
Asked if the name in any way discourages people from banking with them, he said “It doesn’t. We have people of other faiths coming here. Traditional worshippers are even our customers. It is not restricted to Muslims alone. It is for a better life for everyone not for only Muslims.
Oyelola also explained the process of opening an account with Jaiz bank. “To open a savings account, you must have BVN number. With your details on it that correspond with your means of ID. We request for one passport photograph, most recent utility bill and minimum account opening balance of N2, 000. For current account, you have to bring one passport photograph, valid means of ID, most recent utility bill, two references from any bank not operating salary account. For corporate account, if it is a business name, we need all the CAC documents, evidence of registration, two references from any bank, ID card for all the proprietors.
“On all our savings account on a monthly basis, we pull 30% of funds across all savings accounts on a monthly basis. The stakeholders fund, 70%, then 30% from customers fund and then we invest. Once the profit comes, we will share it based on what portion. Like if we make 100 million, the stakeholders will get 70 million and the remaining 30 million will be shared according to what each account contributes on a monthly basis.
“And all our investments are halal businesses.
For instance, I have a customer that does branding. He is one of our high network customers in this branch. He does branding. It is a big firm. He got a PO from a beer company to make them items like key holders, branded caps and t-shirts worth like 130 million.
The guys business is halal. Branding is halal. He brought the PO to us for financing but we couldn’t do it because the product that facility promotes is a product which is not permissible in Islam. So you know now that we don’t’ have any issue with what the customer does but at that point in time, what that customer’s business promotes is not permitted Islamically, so we couldn’t finance him, despite the fact that he has all the basic requirement.
He had to use his own funds to do part of the business. Just to let you know that we follow all transactions to the latter. If you want to build an hotel and you meet all the requirements, if it has to do with what provides shelter, we can, But if it has do to with lounge and bar, we can’t finance such. We don’t go into that.”
BusinessHallmark learnt the bank posted a profit after tax of N834 million for end of 2018, on December 31. The N834 million when compared to the N537 million profit figure for 2017 shows an increase of 55 per cent.