By YUSUF MOHAMMED
One of the most frequent questions asked about Jaiz Bank PLC is: how does the bank make money by giving out loans without receiving interest? Many people wonder how the bank makes money as interest is considered Haram (unlawful) according to Sharia law which the bank practices.
This bank is the first and only full-fledged Islamic bank in Nigeria. While the bank may be unattractive to some people due to its religious coloration, some have been drawn to it because of its name. Unlike regular commercial banks, BusinessHallmark gathered that Islamic banking is based on the principles of profit and loss sharing.
At Jaiz, customers are not tied to terms and conditions of the bank. The bank provides customers with layers of extra transactions and offers products ranging from home, auto and business financing. From three branches in Kano, Kaduna and Abuja in 2012, the bank has expanded to 30 branches spread across the country.
BusinessHallmark visited some of the branches in Lagos. While its financial services are quite different from conventional banks, the structure of the banking hall is quite the same.
The first branch to be visited is on Allen Avenue off Awolowo way Ikeja. Like other banks, Jaiz has a security door at the entrance. The bank also has an Automated Teller Machine (ATM) that is open to customers of any bank in the country. The ATM was not overcrowded like conventional banks.
BusinessHallmark gathered that the reason for this is that many people are not aware that the bank functions like conventional banks. A young man was close to the bank and was asking for an ATM, when he was directed to Jaiz Bank, he was surprised. He said he has been doing business in that environment for almost several years and never knew that he could make use of the bank’s machine.
The environment looked clean and serene. From the look of the female staff, they were all Muslims as they could be seen wearing the hijab. The bankers looked friendly and also excited whenever they saw a customer walk in. In fact, they looked happier when they find out that a customer is not a Muslim.
The branch at Ikeja is a two story building. There are staff on three floors. On the way to the second floor, there is a water dispenser with disposable cups to fetch water to drink. This reporter was told that as soon as the water finishes, it is replaced with another bottle of water.
From the wall clock, to the flat screen television on the wall, everything seemed to be working fine in the bank. As for the toilet, it looks neat and water is not a problem.
It was observed that customers went in and out of the bank without any complains. Well, it could be that there is less complain because the bank is hardly crowded with customers.
While majority of its customers are Muslims, there are some Christians who are interested in the bank’s products.
“Jaiz makes life easier for me. I gave up on conventional banks and opened Jaiz Bank account when I found out about how the bank operates,” said Michael Adewunmi.
The young man told BusinessHallmark that it is one of the best decisions he has made in his life.
He said, “My parents discouraged me from opening an account with them initially because of our faith. We are very strong Christians. In fact, my mum said it is a plot to Islamize people,” he said laughing.
He continued, “As for me, I am a very curious person so I decided to give it a try. My curiosity led me to the bank and I discovered that all processes are opened and not subject to terms and conditions like regular banks. I was amazed
“As I speak with you today, my mum and dad have opened accounts with this bank and they love it.”
When asked what he likes about the bank, he replied that “There is no pressure. When you want to do any business that complies with their laws, they would fund it as long as they see prospects in it. They take the risks with you because you run the business with them. When they offer their services, you know the time it will expire. It makes life easier.”
The branch at Marina on the Island has the same ambience with the one at Ikeja. From the security men to the bankers, customers are received with a warm welcome. Relationship Officer of the Ikeja branch, Ismaeel Oyelola, spoke with BusinessHallmark. According to him, “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 Islamically, 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.”
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.”
Some of their products are Jaiz Wakala investment, Working Capital Financing (Murabaha), Project financing/construction (Istisna’) and lease to own finance (Ijara wa Iqtina).
Jaiz Wakala investment
This product is tailored to corporate and highnet-worth individuals that need high returns with commensurate risks on their investment. Under Wakala, the Bank will collect deposits from its customers and invest in a specific business venture to be agreed with the customer.
The Bank however acts as an agent to invest the depositor’s funds in an ethical manner. It will indicate the expected profit rate to the customer over the agreed period for the investment.
Working Capital Financing (Murabaha)
This is a convenient way of financing working capital requirement of businesses. This product is used to finance purchase of inventory or raw material for our customers locally.
The Bank appoints the customer as its agent to source for the goods the customer wishes to buy, negotiate price, quality and quantity, and communicate the outcome of the negotiation to the Bank via presentation of a pro forma invoice to the Bank. The Bank will then purchase the goods by making payment to the supplier, while the agent takes delivery of the goods. Payment of cost plus profit made to the Bank by customer at the agreed future date.
Project financing/construction (Istisna’)
Under this contract, the customer will request and the Bank will agree to construct and to sell the project to be constructed at the Bank’s selling price (cost plus profit margin) on deferred payment terms and thereafter, the Bank will request another party (contractor) to construct the project.
The payment of the Bank’s selling price may be paid in full or by way of progressive payment as the case may be. Upon completion, the contractor will hand over the project to the Bank or the Bank will authorize the contractor to deliver the project directly to customer.
Lease to own finance (Ijara wa Iqtina)
This is a banking facility based on the contract of Ijarah wa Iqtina which allows you to hire and subsequently purchase assets from the Bank. It is a form of rental for usage of equipment at a fixed agreed amount during the financing tenure.
However, in spite of these attractive products, the public is virtually unaware of them and the bank is apparently the worse for it as reflected in the sparsely populated banking halls.
Jaiz Bank 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.