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By Omodele Adigun
As it commences operation this month in Lagos, Lotus Bank Limited has put Nigeria on the global map of the $2.2trillion global assets of non-interest banking.
The Central Bank of Nigeria (CBN) recently granted a non-interest banking licence to the bank , according to its promoters, to pursue the mission of creating value and growth through digital innovation and best-in-class customer experience for Nigerians.
Commenting on the growth of Islamic finance or non-interest banking worldwide, Hussein Hassan, Global Managing Director of Islamic Banking at JP Morgan, the Financial Services Company, said it is an important aspect of an international businessn that nobody can ignore.
Giving reason for this, he said: “If you look at the growth of Islamic Finance, Islamic Finance, as at today, is about $2.2 trillion. It is expected to grow to about $4trillion in 2022. So it is not an area you can ignore. So it is an important aspect of an international business. It is really based on ethical and religious values that ensure that the products that are economically equivalent to convention products still retain their ethical and religious foundation. ”
Lotus Bank Limited was founded and Chaired by Mrs. Hajara Adeola, an expert in Islamic Finance who also esLotus Capital, the pioneers of non-interest finance in the country.
When it hits the market, Lotus Bank will the first non-interest bank to commence operations from South-west, Nigeria, with a focus to serve people of all faiths, said the bank in a statement.
According to its Managing Director/CEO, Mrs. Kafilat Araoye, who has over 25 years of commercial banking experience in her kitty, Lotus Bank’s focus and guiding principle is “to deliver an alternative option to interest-based banking and to cater to the needs of not just the banked but also the under-banked and unbanked population.”
She explained that non-Interest banking is geared towards supporting the real sector, adding that Lotus Bank aims to improve financial inclusion in the country.
“In addition, the bank will operate transparent pricing models as is the norm in non-interest banking.
“Our values are deeply rooted in partnership. A critical component of our mission is the provision of innovative solutions that drive ethical prosperity for all stakeholders. “We pride ourselves on digital solutions that provide our customers with the convenience of unlimited access to our services and products,” she added.
Speaking about non-interest banking products, which must be approved by shrew scholars, Hassan said: “First, you need to keep in mind that of all the people involved in Islamic finance: bankers, lawyers, etc, the scholars see themselves as the ultimate gatekeepers. They are the ones who are responsible to ensure that the values in the system are retained. So, it is not meant to be easy to get their approval. But it really helps to get them engaged earlier in the process and to be very transparent with them. And to educate them as well. Of course, yes, scholars in their field, but they are not experts in finance. I think the value of working with them can not be under-estimated.
Mrs Araoye, however, explained that the products and service offerings of Lotus Bank “will include non-interest business financing, deposit products (current, savings and investment accounts) and personal financing.
“The bank aims to be a socially responsible organisation that will satisfy its customers across all touch-points.”
Hassan sheds more light on the non-interest business financing: “The main difference between Islamic Finance or non-interest business financing and convention finance is prohibition on charge or interest and prohibition against excessive speculation. The way these two prohibitions play out is mostly in the documentation. And what these prohibitions are based on, I think the concern against having excessive leverage in the system. This is what the prohibition on receiving interest is based on. And the potential to create financial crisis by overtly speculative behavior is what the second prohibition is based on.
“The financial outcome of Islamic Finance and conventional finance is the same but the form is different. For example, if a client wants to have his own financing or if he wants to buy a house, the end result is to own a house but the financing won’t be the same with convention activities. The process of getting there in conventional mortgage: you will lend the money and get the mortgage on the property. But in Islamic financing, you will have to buy the house and then, probably, lease it to them over a period. And then, they will own the house at the end.
“The value which the people increasingly are looking for in the financial dealings are very similar such as social responsible investments, green principles etc.That is, ethical investments, which are lots of what people want.
“The concern is against investing in stocks such as tobacco, gambling, arms manufacturing, pornography.”
