Jaiz Bank, one of the largest Islamic banking services providers in Nigeria, has disclosed that it is targeting a N634.83 million profit after tax for the fourth quarter of 2020.

 The bank’s Q4 earnings forecast also said it was targeting to achieve N705.37million profit before tax and N5.41billion gross earnings for the same period.

Almost without a doubt, the figures sound impressive at a period when it has become difficult for businesses to remain profitable. But then, firms can make forecasts but practically meeting such targets becomes a different issue.

However, while market analysts have extolled the determination and boldness of the bank to pursue such high target, they also believe that this is a tall order considering the excruciating effect of the Coronavirus pandemic which is presently smothering companies and reducing profit margins.

Market observers also believe that many firms have actually gone back to the drawing board to review their earlier forecasts and indeed reduce them, given that they now seem difficult and unachievable.

From a historical perch, Jaiz Bank had posted a profit before tax growth of 48.6 per cent in half year (H1)2020 (N1.346b), compared with its showing in the corresponding period of 2019 (N905.5m).

According to its report and accounts for the period ended June 31, 2020, the bank’s gross income also rose by 39.36 per cent to N8.008bn, up from the N5.746bn recorded in the same period of 2019.

The balance sheet size of the bank under review equally grew by 11.56 per cent as total assets rose to N186.62bn compared with the 2019 audited financial position of N167.27bn.

At the end of June 2020, while its profit after tax grew 43 per cent from N814.3million in 2019 to N1.171billion in 2020, other operating income stood at N179.514million as against the negative (N13.196) recorded in 2019.

As its total income rose by 29.3 per cent to N6.234billion in 2020, up from N4.820billion, market observers fingered the growth of its fees by 27.8 per cent as having boosted the bank’s fortunes.

This half year result, analysts say, is an improvement on the feat achieved at the end of the bank’s financial results for 2019, where it had declared a profit after tax of N2.4bn, representing a rise of 193 per cent from the N834.4m realised in the corresponding period of 2018.

Commenting on the report, the Managing Director/Chief Executive, Hassan Usman, said the feat achieved was an outcome of the bank’s deliberate policy to focus on building culture of ethics and taking the necessary decisions to align its perspective with client expectations.

He said the result was a proof of the added value of the management’s continuous efforts towards making the bank the preferred institution for all stakeholders which was supported by the outcome of its maiden external credit rating conducted by the International Islamic Rating Agency.

Usman said, “An investment-grade rating of A+ (short term) was assigned to the bank which is a resounding corroboration of the Bank’s sound financial health.

“In the years ahead, we shall continue to deepen our engagement with the MSME, agri-businesses across all value chains and focus on un-served markets and the financially excluded segments of our society. This we believe within the current context of our society, shall create an institution that will pass the test of time.”

Non-interest banking, experts say, operates on defined principles such as interest prohibition in debt and exchange contracts, the prohibition of uncertainty or speculative behaviour in business transactions and the prohibition of any form of gambling. It also prohibits funding of what are considered to be unethical concerns such as alcohol, tobacco, ammunition manufacturing and adult entertainment institutions among others.

These qualities set them apart from the conventional banking system though it still survives on the principle of profit-sharing.

On a historical swing, it is to be noted that it was in 1963 that the first modern Islamic bank on record was established in rural Egypt by the economist, Ahmad Elnaggar, with the stated intention of appealing to people who lacked confidence in state-run banks.

 In recent times, and as part of a more deliberate revival of Islamic identity, several Islamic banks have been formed to apply these principles to private or semi-private commercial institutions within the Muslim community. Since then, the number of Islamic banks has grown in number and size. As at 2009, there were over 300 banks and 250 mutual funds around the world complying with Islamic principles, and around $2 trillion was sharia-compliant by 2014. Sources say this figure may have even been tripled at the moment.

Advocates of Islamic banking believe that banking practice must return to the path of “divine guidance” and the rejection of the “political and economic dominance” of the West. They also note that it is about the “most visible mark” of Islamic revivalism, even as they promise “no inflation, no unemployment, no exploitation and no poverty” once it is fully implemented. Islamic banking operations and products are gradually growing in Nigeria with two full-fledged non-interest banks and about 21 other commercial banks trying to obtain licenses to sell some of its products.

Also from a point of history, it is to be observed that Islamic banking crawled into Nigeria in 2007 when the guideline for its operations emerged according to the non-Interest banking regime under Section 33 (1) (b) of the CBN Act 2007. This became necessary also to deepen financial inclusion as well as accommodate the Muslim religious believers who were not very comfortable with the operations of the conventional financial institutions.

Jaiz bank is the first non-interest (Islamic) bank operating in Nigeria. Being that Islamic banking is grounded in Sharia or Islamic principles and morals; the financial institution does not support businesses that could impact society negatively.  A second Islamic financial institution, TAJ Bank, has recently been licensed.

“As part of government’s financial inclusion policy, Jaiz Bank is founded to tap the existing banking opportunity’’, says Sapovadia Vrajlal of the American University of Nigeria, AUN.

By expanding the range and reach of financial products, Islamic finance could help improve financial access and foster the inclusion of those deprived of financial services. Islamic finance emphasizes partnership-style financing and could foster entrepreneurship, reduce poverty. It could help improve agricultural finance, contributing to improved food security. Islamic finance can help meet the needs of those who don’t currently use conventional finance because of religious reasons,’’ Sapovadia Vrajlal of the American University of Nigeria also said.

Despite the challenge of its seeming complicated features in terms of efficiency and unconvincing, Islamic banking has been said to harbour a few impressive attributes.

The first is the widespread dissatisfaction with the performance and consequences of the monetary and financial sector all over the world since the end of World War 2, especially since the 1970s.

Second, is the perception that there is much more inequality in the distribution of income and wealth today than at any other time in the entire past of mankind.

However, there are fears that what could sustain Islamic banking and finance until now can hardly be expected to guarantee its continued progress in the future.

One other issue that favours Islamic banking is its moderate capital base of N10 billion to operate in every state of the Federation, including the Federal Capital Territory (FCT).

In 2017 when the Nigerian government issued its maiden N100 billion 7-year debut Sukuk bond to raise money to fund infrastructure, the Debt Management Office (DMO) said it was oversubscribed.

‘’Investors across a broad spectrum comprising pension funds, banks, fund managers, institutional and retail investors subscribed to the FGN offer is an indication of the wide acceptance of the instrument’’, said the DMO of the offer.

Commenting on the growth of Islamic banking in Nigeria, Mr. Jude Chiemeka, Divisional Head of Trading Business at the Nigeria Stock Exchange (NSE), reckons that the Islamic finance sector has grown noticeably over the years, from about $1.5 trillion in 2016 to about $2 trillion in 2018, driven by growth in Islamic banking assets as well as growth in Sukuk issuances on the stock market.

Over the last few years, Jaiz bank’s performance, however, has been mixed. For instance, the bank reported a total income of N9.9billion against N4.3 billion in 2014, N4.534bn in 2015, N4.688bn in 2016, N6.296bn in 2017 and N7.059bn in 2018, before rising to N10.643billion in 2019. Its expenses increased to N4.6 billion in 2016 from N3.5 billion in 2015. Expenses also increased to N5.402 billion in 2017, N6.161billion in 2018 and leapt to N8.541billion in 2019 while operating profit for the 2016 financial year was reported at N343million and then N894million in 2017.

The bank ramped up its total assets as of December by 28 per cent to N67.6 billion from N52.6 billion in 2015. It rose to N87.312billion in 2017, N108.462billion in 2018 and N166.8billion in 2019 as shareholder’s funds appreciated to N14.7billion from N11.4billion recorded in 2015. Its shareholders’ funds stood at N13.679bn in 2017 and dropped to N13.109bn in 2018 and further dropped to N11.109billion in 2019.

From a loss position in 2012 and 2013, Jaiz Bank has grown its profit after tax to N311.2 million in 2016, N537.1million in 2017, N834.3million in 2018 and N1.786billion in 2019.

There is a growing consensus that there are growth opportunities for Islamic Banking in Nigeria given her relatively large market. It stock price closed on Thursday September 10, 2020 at N0.61 per share, representing a 15.2 per cent drop from its value as at January 31, 2020. Its performance, in terms of strong fundamentals, has been impressive and attractive to investors.

So what does the future hold? Only time will tell.