Jaiz Bank: How Islamic banking differs from the conventional type

Hassan Usman, the chief executive officer of Jaiz Bank, says the basis of the services offered by the bank is based on moral principles derived from all the religions.

Explaining the bank’s services to journalists at a media parley, Usman said the emphasis of their services is the avoidance of interest.

“When you come to the Islamic bank, we take current account just like any conventional bank would take, we also take deposits that are for tenures which do not just demand deposit. To that extent we are similar,” he said.

“We take these deposits, we don’t just keep them, we take these deposits to finance. We try to avoid the word loan, instead, we say we finance business. We use loans technically; it’s not supposed to be a business in Islamic finance. So, we avoid the word loan and rather use the word finance.

“We don’t give loans in the traditional sense, but we finance projects, we finance needs and services of our customers based on either a sales contract with a customer with a deferred payment, or a lease contract with a customer to be paid or we sometimes do sharing contract which means we give capital to the customer and then we share his profit.

“When you look at the conventional bank, all of the money they generate, they don’t sit on it. The central bank will take the reserve ratio, they’ll keep a little, but most of it will be spent on treasury bills.

“An Islamic bank cannot do this; it has to generate different types of debt instruments, which the central bank ought to have provided through the Debt Management Office when we were starting. We had to keep enough money with us to ensure that we had smooth operations.

“The conventional banks, they are about 20+ so they have counterparts, so you don’t have to always see that you are self-sufficient in liquidity; you can take money from your counterparts, you’ll buy money from them and you pay.

“So that’s what your treasury department would be doing on a daily basis, looking at your needs and making sure that you’re square (foreign exchange needs, withdrawal needs). Imagine that within that period, JAIZ had to be self-sufficient in all of this, that means it is always liquid and always ready to meet it’s customer requirements.”

Speaking further, Usman said Jaiz Bank is now a national bank and has its sights set on deepening its activities in other regions of the country.

He also said that the bank has a charity arm through which N2.3 billion has been spent on various activities.