Us­man: More In­vest­ment in In­fra­struc­ture is Nec­es­sary to Grow the Econ­omy

Jaiz Bank Plc is the first and only non-in­ter­est fi­nan­cial in­sti­tu­tion listed on the Nige­rian Stock Ex­change. The Man­ag­ing Di­rec­tor/CEO of the bank, Has­san Us­man spoke to jour­nal­ists on non-in­ter­est fi­nanc­ing, how to grow the econ­omy and other sundry issu


Jaiz Bank got listed on the Nige­rian Stock Ex­change (NSE) at time many com­pa­nies will not want to list their shares let alone your bank that is unique and new. What re­ally gave you that con­fi­dence to list the bank?

If you re­call when we did the list­ing, I said we made a prom­ise. We have to look at the his­tory. Jaiz Bank has been a project prior to start­ing the­busi­ness of bank­ing in 2012. The first Ini­tial Pub­lic Of­fer­ing (IPO) we did was in 2003. That is al­most 15 years ago. This was be­fore the bank­ing con­sol­i­da­tion. It was a time when we had more share­hold­ers than many banks be­cause we had more than 20,000 share­hold­ers then. You also have to know that many of those share­hold­ers were peo­ple who were just yearn­ing for in­vest­ments. Some of them were in­vest­ing in shares for the very first time in their lives and we said look, once we start the bank and the plat­form gets sta­b­lised, we will list so that we can cre­ate av­enue for them to buy or sell as the case may be. That is one of the strong rea­sons for us to list be­cause we have to keep our prom­ise. Sec­ondly, we be­lieve that list­ing has a num­ber of ad­van­tages. It cre­ates not just liq­uid­ity for the shares but also a plat­form to dis­cover the price based on the in­ter­ac­tion of de­mand and sup­ply. It also en­ables Jaiz Bank to reach out to as many in­vest­ing pub­lic as pos­si­ble in and out­side be­cause the Nige­rian Stock Ex­change (NSE) is in­ter­na­tion­alised. The shares that are traded are also go­ing in­ter­na­tional. In fact, what I hear is that those who own shares from out­side, that is for­eign port­fo­lio in­vestors, in terms of vol­ume and value, they have much more stake than lo­cal. So that cre­ates an op­por­tu­nity for any­body who would like to buy the shares and also an op­por­tu­nity for us to be more trans­par­ent. And be­cause of list­ing re­quire­ments, it will en­sure that we are more dis­ci­pline in-house. The pres­sure to meet those re­quire­ments will make us to raise the bar of our ef­fi­ciency level, gover­nance and gen­eral com­pli­ance more so cre­at­ing vis­i­bil­ity. These were the rea­sons, even though the mar­ket was tough. We are look­ing at the long run not the short run. We also know that there were pent up de­mand for peo­ple to get cash, there is the like­li­hood that they will come to the mar­ket and be­cause they have been hold­ing this shares for many years, they will look for the op­por­tu­nity to sell.

Jaiz Bank is the first and only non­in­ter­est bank to list on the NSE. That con­cept is not well un­der­stood by most peo­ple both cus­tomers and in­vestors. Can you ed­u­cate us more what this Is­lamic bank­ing is all about. Is it open to everybody?

Yes, non-in­ter­est or Is­lamic bank­ing is open to all ir­re­spec­tive of their re­li­gious per­sua­sions. The con­cept is in­formed by re­li­gion but the op­er­a­tion is not re­li­gious. It is not only Is­lam that prop­a­gates non-in­ter­est bank­ing; it is equally in­formed by Chris­tian­ity and Ju­daism. All the three re­li­gions talk about im­per­mis­si­bil­ity of charg­ing in­ter­est on loan from their roots. The op­er­a­tions and ac­tiv­i­ties of Is­lamic bank­ing do not dis­crim­i­nate against any re­li­gion. The cri­te­ria are those for bank­ing. The con­tract on Is­lamic bank­ing is tilted to­wards trad­ing and part­ner­ship, while the con­cept in con­ven­tional bank­ing is on loans (giv­ing out money and cre­at­ing debt which can be traded in). In Is­lamic fi­nanc­ing, you have to deal with real com­modi­ties for you to make a re­turn. You can’t just give money to some­one and earn a profit on it. You must par­take in a com­mer­cial and en­tre­pre­neur risk to be able to earn in­come. This is the ma­jor sig­nif­i­cant dif­fer­ence. Of course Is­lamic fi­nance tends to be more eth­i­cal in terms of choice of the type of busi­ness to fi­nance. If you take these two dif­fer­ences that is all you have. That is for non-in­ter­est bank­ing, we trade with our part­ners, we lease as­set to them. We can also jointly fi­nance and share profit or loss as the case may be. In con­ven­tional bank­ing, you just give the loan and then you charge a pre-de­fined rate of in­ter­est. In Is­lamic bank­ing we take ini­tially busi­ness risk and not fi­nan­cial risk. The fi­nan­cial risk fol­lows sub­se­quently but firstly, you have to take a busi­ness risk of buy­ing the com­mod­ity and sell­ing it on credit or buy­ing a com­mod­ity, or an as­set and leas­ing it. Or if you are very com­fort­able with a cus­tomer, you can in­vest in his busi­ness as a part­ner and then you share what­ever profit or loss.

You have been talk­ing about part­ner­ship with busi­nesses, what is the place of in­di­vid­u­als who want to pa­tro­n­ise your ser­vices and ben­e­fit from Is­lamic bank­ing?

In­di­vid­u­als have their life­styles to fi­nance. So we fi­nance their life­style and this can be house­hold equip­ment or mo­tor ve­hi­cle among oth­ers. There is also the need for med­i­cal ser­vices, ed­u­ca­tion ser­vices etc. All of these range of things that an in­di­vid­ual needs, we can fi­nance them. But we come in not by giv­ing you the money but by pro­vid­ing the ser­vice or pro­vid­ing the com­mod­ity on a trade ba­sis with de­ferred pay­ment. That is the kind of fi­nanc­ing that we do - we pro­vide the ser­vices. If it is med­i­cal for in­stance, we hire the ser­vice of the spe­cial­ist to pro­vide the surgery and pay for it. We get the ser­vice from the spe­cial­ist and make it avail­able to the pa­tient who is the cus­tomer and then he pays us later. In­stead of him go­ing to the hos­pi­tal and there is no money and the doc­tor will turn him down, we come in be­tween, buy the ser­vice from doc­tor, add our mark-up, which is what we get for com­ing in be­tween our cus­tomer and the doc­tor so that he can get his surgery or what­ever treat­ment now, rather than later when he gets the money. So af­ter the treat­ment, which was fa­cil­i­tated by our com­ing in, he pays us the money later on agreed term. And sim­i­larly, if it is ed­u­ca­tion for the child, we buy the credit hours and he goes through the ed­u­ca­tion now, and then pays us later. And be­cause we are sell­ing a ser­vice to him, we earn a profit on it.

It sounds so in­ter­est­ing. But what are you do­ing to deepen the aware­ness so that more peo­ple can re­ally un­der­stand this con­cept?

Part of the aware­ness cre­ation is what we are do­ing now through this in­ter­view. You (the me­dia) are the chan­nel through which in­for­ma­tion is dis­sem­i­nated. We en­gage as much as pos­si­ble with the me­dia both print and elec­tronic. We are also, now look­ing at our strat­egy for the so­cial me­dia as well. Also, any­where we go, we en­gage the lo­cals and tell them how this dif­fers and how ad­van­ta­geous this way of bank­ing is to them and the ben­e­fits they stand to gain and the fact that any­body, any­where is wel­come. As you can see, in our bank, we have staff mem­bers of dif­fer­ent re­li­gions. In our cus­tomer base also, we have Mus­lims and Chris­tians. So we do not dis­crim­i­nate. What we look at is what you can bring on the ta­ble and we deal with that.

There seems to be an in­ter­est from the fed­eral gov­ern­ment side in em­brac­ing non-in­ter­est fi­nanc­ing be­cause there is a huge pool of funds out there to tap from. The fed­eral gov­ern­ment just is­sued a Sukuk to raise funds. How do you see this new de­vel­op­ment and is Jaiz Bank play­ing any role in this?

Yes, we have been in the fore­front. We have been try­ing to make the gov­ern­ment to un­der­stand that this form of fi­nanc­ing is at­trac­tive to the pub­lic sec­tor. It pro­vides us an av­enue to di­ver­sify the way the pub­lic in­fra­struc­ture is de­vel­oped. And the spe­cific in­stru­ment, which is the Sukuk is used world over. In West Africa be­fore now, Sene­gal had is­sued it, Gambia has done that, Togo and Ivory Coast have all is­sued sov­er­eign Sukuk. The beauty of a Sukuk is that un­like a con­ven­tional bond that you take­out by­ways and means, spend it any­how, the pro­ceeds of Sukuk has to be ded­i­cated to spe­cific projects. For in­stance, the just con­cluded N100 bil­lion Fed­eral Gov­ern­ment Sukuk is meant for the con­struc­tion and build­ing of roads across the coun­try. If those projects are not iden­ti­fied, you can­not raise money for Sukuk be­cause Sukuk in­vestors can­not re­alise any ben­e­fit with­out an un­der­ly­ing as­set. They are in­vest­ing to earn and for them to earn, those projects have to be iden­ti­fied and fi­nanced. If it is con­struc­tion of rail­way or air­port, they have to be es­tab­lished. It is the ser­vices that those in­fra­struc­ture will pro­vide that is be­ing sold by the Sukuk hold­ers. So they now get in re­turn the profit that is dis­trib­uted or the rental that the gov­ern­ment has to pay or who­ever is us­ing those ser­vices or in­fra­struc­ture. So the re­turn to Sukuk holder is not in­ter­est but it is the rent or profit that is gen­er­ated from those projects or from leas­ing of those as­sets. So Sukuk gives an ex­cel­lent way to en­sure that projects are man­aged prop­erly and there is no di­ver­sion, which is very ram­pant in this part of the world lead­ing to so many aban­doned projects. So, we are part of this from the in­cep­tion.

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