The Special Adviser to the Central Bank of Nigeria (CBN) Governor on Non-Interest Banking, Dr Bashir Aliyu Umar, has said the motive behind the introduction of Islamic Banking in the country is to attract a large number of Muslims that have hitherto steered away from the organised conventional financial services.

Umar, who was speaking at the workshop for business editors and Finance Correspondents Association of Nigeria (FICAN) in Dutse, Jigawa, last week, pointed out that most Muslims preferred keeping their funds out of the banking halls due to their aversion to interest and interest-based products, adding that Islamic Banking would lead to replacement of informal markets with formal and regulated ones.

He observed that the Islamic financial services would deepen the financial markets as new market and institutional players would be introduced such as Islamic money market, Islamic asset management companies, takaful, etc.

Other benefits inherent in the Islamic Banking model, he said, included: competition in the industry that would engender a concomitant reduction of interest rates; enhanced oversight and regulation through the Sharia supervisory boards; enhanced investment in the critical sector of the economy through the use of sukuk and development of the real sector of the economy through its asset- backed financing which would avail funds only to production and real investment activities, among others.

He listed the challenges facing the practice of Islamic finance in the country as asset liability mismatch and absence of Sharia compliant liquid investment instruments; treatment of profit sharing investment accounts; deposit insurance; tax treatment and Sharia expertise.

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