A STUDY OF THE LEGAL AND REGULATORY ISSUES OF NON-INTEREST BANKING SYSTEM IN NIGERIA
By ADEBAYO, RAFIU IBRAHIM Ph D
Abstract
Voices raised from various quarters against the flaws, shortcomings and exploitation of the conventional financial system clearly indicate that the authors of the system could not redeem the image without resorting to alternative financial system devoid of the exploitative tendencies in the former system. The worldwide acknowledgement of usury as an economic instrument inimical to human welfare, as well as the havoc and misery associated with a usury-based financial system in the modern society is likely a good reason for the wide acceptance of Islamic financial institutions. Of recent, the Central Bank of Nigeria equally joined the race by coming up with a draft framework for the regulation and supervision of non- interest banks in Nigeria. The draft addresses such issues as interest-free banking, riba, risk management, profit sharing and liquidity management. On the other hand, there is no doubt that Islamic financial institutions in Nigeria are likely to face both legal and operational problems or else the existing banking laws will have to be amended, or the Islamic financial institutions will have to be exempted from such laws. This implies that professional economists, bankers and jurists need to engage in a more rigorous examination of the principles to distinctively demarcate Islamic financial institutions from other institutions, which in our own view, are not clearly spelt out in the draft framework issued by the Central Bank. It becomes the focus of this paper therefore to critically examine the draft with a view to addressing its compatibility with Islamic financial services. Some research problems which are to be addressed by this paper include how will the problem of inter-bank relationships not affect Islamic financial institutions as the two are operating within different worldviews and ideologies? How will the Islamic financial institutions compete favourably with conventional banks in their bid to engage in less risky ventures without violating the injunction of Islam?
Contents
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