An Appraisal of the Legal Framework of Islamic Banks Final

8/3/2019 An Appraisal of the Legal Framework of Islamic Banks Final

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AN APPRAISAL OF THE LEGAL FRAMEWORK OF NON INTEREST

BANKING (ISLAMIC BANK) IN NIGERIA

INTRODUCTION

The ravaging effect of the global financial crises, the Nigerian Banking Crises and

Stock Market Meltdown has drawn considerable attention of Nigerians and the

international community to the financial sector.

Earlier this year the Central Bank Governor came out with the news of the

proposed introduction of the Islamic Banking Model in Nigerian under the Islamic

Economic system, varied debates on this discuss have continued to dominate the

contents of both print and audio media.

Many have argued based on purely religious grounds while others have argued

from mixed point of religious, emotional and Legal stand points, whatever the

point of view from which one approaches this enigma, the truth remains that the

debates rages on and Nigerians awaits for the drama to unfold.

But we as scholars of the Law of banking regulations have a duty to approach thistopical issue from a strictly legal perspective and to be able to advice whoever

cares to hear on the correct legal basis for the introduction of this neo- banking

model in our country.

Pursuant to the above, I have embarked on this research to make an appraisal of the

legal basis if any, for the introduction of this much criticized banking system in

Nigeria, and a comparative analysis of the legal framework in Nigeria with othercountries and whether or not there is a misconception of existing Nigerian

legislation and I strongly believe that at the end of this discourse even though we

may not all agree to my conclusions on this issue but I strongly believe that we

shall have at our disposal veritable and sufficient material to enable us individually


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form our own legal stand point and to be able to give professional legal advice to

whoever will care to listen when the need arises.

However, I wish to state categorically here that this paper is purely for

academic/professional purposes and all my deductions and conclusions are purely

based on legal principles as stated in relevant statutory enactments, references to

religious books are only as a result of the popular religious genealogy of the non-

interest banking model.

HISTORICAL EVOLUTION

USURY AS A RELIGIOUS CONCEPT

Usury is the practice of charging excessive, unreasonably high, and often illegal

interest rates on loans. Originally, when the charging of interest was still banned by

Christian churches, Usury simply meant the charging of interest at any rate (as well

as charging a fee for the use of money, such as at a bureau de change). In countries

where the charging of interest became acceptable, the term came to be used for

interest above the rate allowed by law. The term is largely derived from Christian

religious principles; Riba is the corresponding Arabic term and ribbit is the

Hebrew word.

The pivotal change in the English-speaking world seems to have come with the

permission to charge interest on lent moneyparticularly the 1545 act "An Acte

Agaynst Usurie" (37 H.viii 9) of King Henry VIII of England.1

1. Wayne A.M. Visser and Alastair MA Short Review of the Historical Critique of Usury (Riba)http://en.wikipedia.org/wiki/Usurydownloaded on 25th July, 2011

USURY AND THE HOLY QURAN
http://en.wikipedia.org/wiki/Usuryhttp://en.wikipedia.org/wiki/Usury


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Allah has forbidden Usury.Allah will destroy usury2Oh ye who believe be

afraid of Allah and give up what remains of Usury, if you are really believers 3

Those who charge usury are in the same position as those controlled by the devil's

influence. This is because they claim that usury is the same as commerce.

However, God permits commerce, and prohibits usury. Thus, whoever heeds this

commandment from his Lord, and refrains from usury, he may keep his past

earnings, and his judgment rests with God. As for those who persist in usury, they

incur Hell, wherein they abide forever 4

God condemns usury, and blesses charities. God dislikes every disbeliever, guilty.

Lo! those who believe and do good works and establish worship and pay the poor-

due, their reward is with their Lord and there shall no fear come upon them neither

shall they grieve. O you who believe, you shall observe God and refrain from all

kinds of usury, if you are believers. If you do not, then expect a war from God and

His messenger. But if you repent, you may keep your capitals, without inflictinginjustice, or incurring injustice. If the debtor is unable to pay, wait for a better time.

If you give up the loan as a charity, it would be better for you, if you only knew .5

2. Quran Ch. 2v.275

3. Quran Ch. 2v228

4. Al-Baqarah 2:275

5. Al-Baqarah 2:276-280


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O you who believe, you shall not take usury, compounded over and over. Observe

forbidden, and for consuming the people's money illicitly. We have prepared for

the disbelievers among them painful retribution 6.The usury that is practiced to

increase some people's wealth, does not gain anything at God. But if people give to

charity, seeking God's pleasure, these are the ones who receive their reward many

fold7.

USURY AND THE HOLY BIBLE

The Old Testament

From the King James Version

If thou lend money to any of my people that is poor by thee, thou shalt not be to

him as an usurer, neither shalt thou lay upon him usury.8 Take thou no usury of

him, or increase: but fear thy God; that thy brother may live with thee.9 Thou shalt

not give him thy money upon usury, nor lend him thy victuals for increase.10 Thou

shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury

of any thing that is lent upon usury.11

Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not

lend upon usury: that the LORD thy God may bless thee in all that thou settest

thine hand to in the land whither thou goest to possess it.

6. Al-Nisa 4:161

7. Ar-Rum 30:39

8. Exodus 22:25

9. Leviticus 25:36

10.Leviticus 25:3711. Deuteronomy 23:19


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If thou lend money to any of my people, even to the poor with thee, thou shalt not

be to him as a creditor; neither shall ye lay upon him interest.12And if thy brother

be waxen poor, and his means fail with thee; then thou shalt uphold him: as a

stranger and a settler shall he live with thee. Take thou no interest of him or

increase; but fear thy God; that thy brother may live with thee. Thou shalt not give

him thy money upon interest, nor give him thy victuals for increase.13

Thou shalt not lend upon interest to thy brother: interest of money, interest of

victuals, and interest of any thing that is lent upon interest. Unto a foreigner thou

mayest lend upon interest; but unto thy brother thou shalt not lend upon interest;

that the LORD thy God may bless thee in all that thou puttest thy hand unto, in the

land whither thou goest in to possess it.14

Thou shall not lend upon usury to thy Brother, usury of money, usury of victuals,

and usury of anything that is lent upon usury.15 He that putteth not out his money to

usury, nor taketh reward against the innocent, he that doeth these things shall never

be moved 16

Unto a foreigner thou mayest lend upon interest; but unto thy brother thou shalt

not lend upon interest; that the LORD thy God may bless thee in all that

thou puttest thy hand unto, in the land whither thou goest in to possess it17

12 .Exodus 22:2513.Leviticus, 25:35-37

14.Deuteronomy, 23:20-2115.Psalm 15 v. 516.Deuteronomy 23:20
http://mechon-mamre.org/p/pt/pt0325.htmhttp://mechon-mamre.org/p/pt/pt0325.htmhttp://mechon-mamre.org/p/pt/pt0523.htmhttp://mechon-mamre.org/p/pt/pt0325.htmhttp://mechon-mamre.org/p/pt/pt0523.htm


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New Testament

The New Testament contains references to usury:

Finally the master said to him 'Why then didn't you put my money on deposit, so

that when I come back, I could have collected it with interest? Thou oughtest

therefore to have put my money to the exchangers, and then at my coming I should

have received mine own with usury.19 Out of thine own mouth will I judge thee,

thou wicked servant. Thou knewest that I was an austere man, taking up what I laid

not down, and reaping that I did not sow. Wherefore then gavest not thou my

money into the bank, that at my coming I might have required mine own withusury?"20

It is trite from the verses of both Quran and the holy bible recited above that both

religion forbids the concept of USURY even though the New Testament appears to

be liberal towards the concept of Usury. Thus, it is this supposed acceptance of

usury by the New Testament that led to the popular notion that the concept Usury

has been accepted by the Christian faith and the general believe that the

conventional Banking model is an offshoot of the Judeo-Christian religion, the

question that therefore, begs for an answer is whether or not the principles of the

new testament bible supersedes that of the old testament.

18.Luke 19:23

19.Matthew 25:27

20.Luke 19:22-23

LEGAL BASIS FOR NON INTEREST FINANCIAL INSTITUTION IN

NIGERIA
http://bibref.hebtools.com/?book=%20Luke&verse=19:23&src=NIVhttp://bibref.hebtools.com/?book=%20Luke&verse=19:23&src=NIVhttp://bibref.hebtools.com/?book=%20Matthew&verse=25:27&src=KJVhttp://bibref.hebtools.com/?book=%20Matthew&verse=25:27&src=KJVhttp://bibref.hebtools.com/?book=%20Luke&verse=19:22-23&src=KJVhttp://bibref.hebtools.com/?book=%20Luke&verse=19:22-23&src=KJVhttp://bibref.hebtools.com/?book=%20Luke&verse=19:23&src=NIVhttp://bibref.hebtools.com/?book=%20Matthew&verse=25:27&src=KJVhttp://bibref.hebtools.com/?book=%20Luke&verse=19:22-23&src=KJV


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These guidelines are issued pursuant to the non interest banking regime

under Section 33(1) (b) of the Central Bank Act, 2007, Sections 23 (1) of

BOFIA 1991, section 55(2) of 1991 now S 57(2) of BOFIA 2004, Section 59(1)

(a) of 1991 now 61 (1) (b) of 2004, Section61 of BOFIA 1991 (as amended)

now 64 of 2004 and section 4 (1)(c) of the Regulation on the Scope of Banking

Activities and Ancillary Matters No.3, 2010. It shall be read together with the

provision of other relevant sections of BOFIA 1991 (as amended) the CBN

Act, 2007, CAMA 1990 (as amended) and circulars/guidelines issued by the

CBN from time to time21

Section 33(1) (b) of the CBN Act22 states thatIn addition to any of the powers

under this Act, the Bank may-issue guidelines to any person and any institution

under its supervision. The combined effect of this proviso and the power granted

to the CBN by BOFIA23 gives the Central Bank its major power to issue guidelines

for the operation of banks generally and most recently the Profit and Loss sharing

banks.

21. Guidelines for the Regulation & supervision of Institutions Offering Non-Interest Financial Services in Nigeria dated the 20th

June, 2011dowloaded from http://www.cenbank.orgon 16th July, 2011.

22. CAP.C4 Laws of the Federation of Nigeria, 2004.

23. Also Section 1(1) of BOFIA, 2004.
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It is whether or not the Islamic Banking model falls within the ambit of

persons and institutions as envisaged by the relevant statutory provisions that

forms the basis of this work.

Reference was first made to Profit and Loss sharing bank in Sections 23(1) of

BOFIA. And according to this section, Every bank shall display at its office its

lending and deposit interest rates and shall render to the Bank information on such

rates as may be specified from time to time, by the Bank: Provided that the

provisions of this subsection shall not apply to profit and loss sharing banks.

Profit and Loss sharing Bank was excluded from this provision because here the

concept of interest is replaced by profit and loss sharing, so it is only logical that

this category of banks be excluded since their operation does not include taking or

paying of interests on lending and deposits respectively.

Also in Section 52 of BOFIA, 1991 reference was further made to it that The

Governor may exempt community banks (Now Micro-Finance Banks) or profit

and loss sharing banks from the provision of this decree

23. This Section was excluded from the extant CAP B3 of the Laws of the Federation of Nigeria, 2004

By the combined provision ofSection 57 (2) of BOFIA, 2004 and Section 61(1)

(a) of same, the Bank maywithout prejudice to the provisions of subsection 1 of


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this Section make rules and regulations for the operation and control of all

institution under the supervision of the Bank and the Bank shall have power to

supervise and regulate the activities of other financial institutions and specialized

banks. A combined reading of these provisions and the provisions of Section 33(1)

(b) of the CBN Act reveals without any iota of doubt that the Bank has the power

to Supervise, regulate specialized banks (non-interest banks inclusive) and to issue

guidelines in the process of doing same.

In as much as the above sections appeared to be unambiguous, it poses a serious

conumdrum when it comes to determining what constitutesfining the scope of

Non Interest Bank as inteneded by our legilative draftsmen in relation to the

recent introduction of the JAIZ INTERNATIONAL BANK PLC24 (Islamic

Bank) to carry out banking business strictly in accordance with Islamic tenets and

to even go further to constitute an Islamic Advisory Council to advice the Bank on

same. Whether or not the extant CBN Act and the BOFIA under appraisal gives the

CBN sufficient power without more to establish the Islamic variant of the Profit

and Loss sharing bank is a mystery that we seek to unravel unravel.

24.RC:476637


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The proper place to begin is to look at the definition of the concept under the

definition Section of the BOFIA25. In this decree, unless the context otherwise

requires:

Bank means the Central Bank of Nigeria

banks means a bank licensed under this decree

Banking business means the business of receiving deposits on current accounts,

savings account or other similar accounts, paying or collection of cheques, drawn

or paid by customers, provision of finance or such other business as the Governor

may by order publish in the gazette, designate as banking business.

Profit and Loss sharing bank means a bank which transact investment or

commercial banking business and maintains a profit and loss sharing accounts

It is clear from the definition of Profit and Loss Sharing Banks above that

reference was never made to any religion and we believe strongly that the

legislative intent was to steer clear of introducing religion into the Nigerian

Banking sector in compliance with Section 10 of the 1999 Constitution as

amended. But from a practical perspective, can a Profit and Loss Bank be

distinguished from Islamic Bank?


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25. Section 66 of BOFIA, 2004

The commonest practical approach to Islamic banking have centered around

financial equity based approaches, most notably Mudarabah - a joint venture

between the bank and a partner with both contributing to the capital of the project

and sharing the profit or loss - and Musharakah - in which all the capital for an

investment is provided by the bank in return for a predetermined share of the profit

or loss of the business undertaking 26.

Section 10 of the 1999 Constitution states that The Government of the

Federation or of a State shall not adopt any religion as State Religion.The Non

Interest Financial Institution Framework 27 stated that: A Non-Interest Financial

Institution (NIFI) means a bank or Other Financial Institution (OFI) under the

purview of the Central Bank of Nigeria (CBN), which transacts banking business,

engages in trading, investment and commercial activities as well as the provision

of financial products and services in accordance with Shariah principles and rules

of Islamic commercial jurisprudence. The Glossary of Terms of the CBNs NIFI

Framework states that: Shariah Principles refers to the divine guidance as given

by the Holy Quran and the Sunnah of the Holy Prophet and embodies all aspects

of the Islamic faith, including beliefs and practices.


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26. Kahn, M.S.and A. Mirakhor. (1986) The Framework and Practice of Islamic Banking. Finance & Development Journal, Vol. 1, 32-36

27. Draft Framework for the Regulation & Supervision of Non- Interest Banks in Nigeria, http://www.cenbank.orgaccessed on 16th July, 2011

The only legally valid definition of this concept is the definition of Non Interest

Bank as stated in Section 66 of the BOFIA, 2004 above. Profit and Loss Banking

has always been the interpretation and understanding of Non-Interest Financial

Services in Nigeria. When the CBN granted an Approval-in-Principle Licence to

Jaiz International Bank PLC in 2004 while Chief Joseph Sanusi was the CBN

Governor, the licence was issued for it to carry on business as a Profit and Loss

Sharing Bank. Curiously, the present CBN Governor, Mallam Sanusi Lamido

Sanusi, was widely reported in the mass media to have announced on Monday,

20th June, 2011, at a Conference on Islamic Banking in Dakar, Senegal, that the

CBN had issued Jaiz International Bank PLC an Approval-in-Principle as the first

Islamic Bank in the country. Jaiz Bank was unable to operate as a Profit and Loss

Sharing Bank not because there was no Islamic Banking Guideline but simply

because it was unable to raise the minimum capital requirement of N25Billion.

The CBN has now inexplicably lowered the capital requirement for the

Profit and Loss Sharing Bank now christened Islamic Banks to just

N10Billion to achieve National Bank status as against the N25Billion it

stipulated for Deposit Money Banks. Why the Sanusi Lamido Sanusi-led CBN

is unduly eager to make life easier for Jaiz International Bank PLC and other

proposed Islamic Banks is left for us to determine28.

By constructively and unconstitutionally changing the nomenclature of the Non-

Interest Banking products to Islamic Bank, the CBN had also unjustly excluded

non-Muslim Nigerians from the emerging Non-Interest Banking business
http://www.cenbank.org/http://www.cenbank.org/http://www.cenbank.org/


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28. E. Eyieyien, A Critical Analysis of Sharia Banking in Nigeria downloaded fromhttp://www.proshareng.com/articles/2209on 21st July,

2011

sub-sector contrary to the provisions of Chapter 2 of the constitution.28

Section 16 1(d) of the 1999 Constitution as follows: The state shall within the

context of the ideals and objectives for which provisions are made in this

constitution-without prejudice to the right of any person to participate in areas

of the economy within the major sector of the economy, protect the right of

every citizen to engage in any economic activities outside the major sectors of

the economy. I must state categorically at this juncture that none of the statutory

provisions under review classified the said concept into Islamic Banks and others

as proposed by the Central Bank, the said enactments mentioned only Non Interest

Banks.

Another shocking aspect of the NIFI Framework was that it provided for the

creation of the CBN Shariah Council. The CBN Shariah Council is a body set up

to advice the CBN on Shariah matters for the effective regulation and supervision

of NIFIs (Non Interest Banks or the Islamic variants of the profit and loss sharing

banks) in Nigeria. Since such a body must necessarily comprise only Muslims,

the CBN would be flouting fundamental provisions of the Nigerian Constitution as

follows:

i. Contravening the Federal Character Principles entrenched in Section 14(3)

of the Constitution which states that The composition of the Government of

the Federation or any of its agencies and the conduct of its affairs shall be

carried out in such a manner as to reflect the federal character of Nigeria and

29. The Contitution of the Federal Republic of Nigeria, 1999 ammended.
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the need to promote national unity, and also to command national loyalty,

thereby ensuring that there shall be no predominance of persons from a few

State or from a few ethnic or other sectional groups in that Government or in

any of its agencies.

ii. Contravening the secularity of Nigeria enshrined in Section 10 of the

Constitution of the Federal Republic of Nigeria which states that The

Government of the Federation or of a State shall not adopt any religion

as State Religion;

But unarguably the most significant issue is that fact that the CBN was

introducing religion into Nigerian banking contrary to the spirit, letter and

intendment of Section 43(1) (a) of BOFIA which states:

Except with the written consent of the Governor (a) no bank shall, as

from the commencement of this Decree, be registered or incorporated

with a name which includes the words Central Federal,

Federation, National, Nigeria, Reserve, State, Christian,

Islamic, Moslem, Quaranic, Biblical.

It is clear from the above provision that the prospect of any Private Liability

Bank and non state owned Public Limited Liability Bank being able to

obtain the written consent of the CBN Governor to use any of the restricted

words in its name is almost non-existent.

30. Oche, PN Banking Law and Practice in Nigeria (Jos: Heirs Great Commission, 2002) P.71


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The BOFIA was originally issued in 1991 as a decree and signed into law by

the then Military President, Gen. Ibrahim Badamasi Babangida. The

Governor of the CBN at the time was Alhaji Abdulkadir Ahmed. Though a

committed Muslims, Gen. Babangida and Alhaji Ahmed were obviously

sensitive to the religious sensibilities of Nigerians, especially with the crisis

the country was thrown into over the issue of Nigerias membership of the

Organisation of Islamic Countries (OIC) at that time. The Babangida

government saw that it was imperative to include an unambiguous statutory

provision in Section 39(1) of the BOFIA,1991 as amended which would

ensure that no religious colouration was given in any guise to banking in the

country.

Obviously, the anticipation and intendment of the law was that the Governor

of the Central Bank of Nigeria would not be swayed by religious

considerations to grant a waiver to allow the use of those religious

appellations even though it invested him with that power, and I strongly

argue that the necessary implication of this proviso is for the Bank to steerclear of bringing religion into the Banking Sector and to even go further to

grant the said waiver to one religion while leaving the rest religion out can

clearly be said to contrary to the spirit and intent of the said proviso. Some

have erroneously argued that the present CBN Governor has now exercised

that power by introducing Islamic Council to guide the Bank on the

operation of the bank! Is this expedient? What was the over-riding and

compelling reason for this exercise of the Governors discretion? What has

31. E. Eyieyien op cit at P.3


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changed in Nigeria between 1991, when Gen. Babangida signed the BOFIA

into law, and 2011 when we are now confronted with even more extreme

religious zealotry and fundamental religious terrorism with the advent of

Boko Haram?

Even more strange is that the CBN NIFI Framework even re-affirmed the

statutory provision in Section 39(1) of BOFIA in Section 10.1 of the NIFI

Framework under the heading Branding. That section states:

In line with the provisions of Section 39 (1) of BOFIA 1991 (as

amended), NIFIs shall not include the word Islamic as part of their

registered or licensed names.

They shall, however, be recognized by a uniform symbol designed by the

CBN. All the signages and promotional materials of NIFIs shall bear the

symbol to facilitate recognition by customers and the general public.

Is this then not superfluous? What is in a name after all, one might argue.

Clearly, the law is really not as concerned about names as it is with keeping

religion out of Nigerian banking.

Already, many non-Muslims have, understandably and expectedly, read

religious motives to the issuance of the Framework and the passion with

which the CBN is pursuing the establishment of Islamic Banking in Nigeria.

This is more so since it is being introduced by the CBN under the purview of

its current Governor, Mallam Sanusi Lamido Sanusi, who is known to be an

Islamic Scholar with expertise in the Shariah Law having obtained a degree

in that regard from the University of Africa, Khartoum, Islamic Republic of

Sudan.


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Section 4(1) of the Regulation on the scope of Banking Activities and Ancillary

Matters No.3, 2010 states thus:

From the effective date, the only types of banks that shall be permitted to carry on

banking business in Nigeria shall be limited to the following types as contemplated

under BOFIA.

Commercial banks

Merchant banks and,

Specialized banks which include non interest banks, micro-finance banks,

development banks, and mortgage banks32.

CURRENT REQUIREMENTS FOR LICENSING OF NON-INTEREST

BANKS

A non Interest Financial Model shall be licensed in accordance with the

requirements issued by the Bank from time to time.33

32.http://www.cenbank.orgaccessed the on 17th July, 2011

33. See Oche P N, Op cit at 52-78
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An application for Banking license shall be accompanied by evidence of

technical agreement executed by the promoters of the proposed institutions

with an established and reputable Islamic bank or financial institution. The

agreement shall explicitly specify the role of the 2 parties and shall subsist

for a period of not less than 3 years from the date of commencement of

operations of the licensed Institution offering Islamic Financial System.

A license to undertake Islamic banking business operation may be issued by

the CBN upon such terms and conditions which authorize the operation of a

non interest financial institution on a regional or national basis for banks, or

any other basis for other financial institution 34.

An Institution offering Islamic Financial System with Regional Banking

authorization shall be authorized to carry on its banking within a minimum

of six (6) and a maximum of twelve (12) contiguous states of the Federation

lying within 2 geopolitical zones as well as within the FCT

An Institution offering Islamic Financial System with National Banking

34. Guidelines for the Regulation & supervision of Institutions Offering Non-Interest Financial Services in Nigeria, op cit, p.4


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authorisation shall be entitled to carry on banking business operation within

every state of the Federation including the FCT, Abuja.

ISLAMIC BANKING LEGISLATION IN OTHER COUNTRIES

BANK ISLAM MALAYSIA BERHAD (BIMB)

BIMB was established after the enacting of the Islamic Banking Act (IBA) in

1983, the IBA permitted the establishment of the first Islamic Bank in Malaysia.

BIMB with a paid up capital of RM 100 million and an authorised capital of RM

500 million is carrying out its activities on an interest free basis. Tengku

Razaleigh, the then Finance Minister described the Islamic bank as the

first step in the government's efforts to instill Islamic values into the country's

economic and financial systems as a replacement for the current Western-base

economic system (NST 6 July 1982).

The Islamic Bank of Thailand was set up by the Islamic Bank of Thailand Act

B.E. 2545 (2002), as a state enterprise under the Ministry of Finance, administered

by a board of governors, with an advisory council on Islamic banking. The bank

operates in accordance with the rules of Sharia, or the Islamic rules on transactions.

34.http://www.islamic-world.net/islamic-state/malay_islambank.htm accessed on 25th July, 2011

35. http://www.bankthailand.info/Islamic-Bank-of-Thailand.htm accessed on 25th July, 2011
http://www.islamic-world.net/islamic-state/malay_islambank.htmhttp://www.bankthailand.info/Islamic-Bank-of-Thailand.htmhttp://www.islamic-world.net/islamic-state/malay_islambank.htmhttp://www.bankthailand.info/Islamic-Bank-of-Thailand.htm


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ISLAMIC BANK OF INDONESIA, ACT NO. 21 OF 2008

Act No. 21 Concerning Sharia (Islamic) Banking provides a more comprehensive

regulatory framework for Sharia banking in Indonesia.This act covers Islamic

Banks and Sharia Business Units (UUS) which are working units of conventionalcommercial banks conducting business based on the Sharia Principle. The act

stipulates that licenses are provided by Bank Indonesia and Sharia Banks are

required to be limited liability companies with local ownership requirements.

CONCLUSION:

It is trite from the above that the Non-Interest Financial Institutions derives its

origin from religion. Both Islam and Christianity prohibit Usury or Ribba and

though the New Testament bible appears to be liberal toward this doctrine one

cannot clearly states that one supersedes the other.

The Banking Legislation steered clear of imputing any form of religion into the

Banking sector, this should be applauded and all stakeholders in the bankingindustry must strive to uphold this ideal. Religion was never mentioned anywhere

in these legislations and as such we must adhere strictly to this laws inorder to

uphold the secular nature the nation.

Both the CBN Act and the BOFIA permits the licensing of Non-Interest Banks in

Nigeria but left the CBN with the discretion to determine what constitutes this type

of Banks and also to issues guidelines to supervise and regulate same. This

discretion must be exercised judiciously in the general interest of the country and

the litmus test being overriding public interest .


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36. http://www.cgap.org/p/site/c/template.rc/1.1.6058/ downloaded on 25th July, 2011

RECOMMENDATION

It is recommended that a bill for an Act to Establish Islamic Banking variants of

the Non Interest Bank be presented before the National Assembly as was done in

Malaysia, Indonesia and Thailand.
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REFERENCE

1. Oche, P.N. Banking Law and Practice in Nigeria, 2nd Impression

(Jos:Jimmy Litho Press, 2004)

2. Banks and Other Financial Institutions Act (BOFIA) LFN, 2004 Cap B3

3. Central Bank of Nigeria Act Cap C4 LFN 2004

4. The Constitution of the Federal Republic of Nigeria, 1999 as amended

5. Revised Standard Version, Holy Bible.

6. The Holy Quran

INTERNET REFERNCE

1. Review of Universal Banking Model downloaded from http://:

www.cebbank.org

2. Requirement for New Banking Licences downloaded from http://:

www.cenbank.org

3. Guidelines for the Regulation and Supervision of Institutions Offering Non-

Interest Financial Services in Nigeria downloaded from http://:

www.cenbank.org

4. Regulation on the Scope of Banking Activities & Ancillary Matters, No.3,

2010 downloaded from http://: www.cenbank.org

5. The Framework for the Regulation and Supervision of Non- Interest Banks

in Nigeria downloaded from http://: www.cenbank.org

6. Guidelines o Non-Interest Window and Branch Operations of Conventional

Banks & Other Financial Institutions downloaded from http://:

www.cenbank.org
http://www.cebbank.org/http://www.cenbank.org/http://www.cenbank.org/http://www.cenbank.org/http://www.cenbank.org/http://www.cenbank.org/http://www.cebbank.org/http://www.cenbank.org/http://www.cenbank.org/http://www.cenbank.org/http://www.cenbank.org/http://www.cenbank.org/


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An Appraisal of the Legal Framework of Islamic Banks Final

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