Islamic banking is defined
by (institution of Islamic banking & insurance IIBI 1991:3) as a system of
banking activity that is consistent with the principles of the shariah [Islamic
rulings] and it’s practical appreciation through the development of Islamic
Economics.
The origin of modern Islamic bank can
be traced back to the very birth of Islam, when the prophet himself acted as an
agent for his wife’s trading operations. Islamic partnership [Modarabah]
dominated the business word for centuries and the concept of interest found
very little application in day-to-day transactions. Such partnership performed
an important economic function. They combined the three most important factor
of production namely: capital, labour and entrepreneurship the letter two
function usually combined in one person. The capital owner contributed the
money while the partner managed the business. Each shared in a pre-determined
share of the profits. If there was a loss, the capital provider lost his money
and the money and the manager lost his time and labour.
Then in1990s, Mr. Charles Chukwuemeka
Soludo introduced Islamic banking
formally in Nigeria, which began in 1991 through the amendment & to the
banks and other financial institution Act, BOFIA. In 1996, the central bank of
Nigeria [CBN] granted approval to Habib Nigeria bank to deal in Islamic banking
principals. In 2004, Jaiz international bank plc applied for full pledged
Islamic banking license and was however granted approval in principal to that
effect. In 2008 Islamic balance working group comprising of Nigeria deposit
insurance corporation, NDIC, National insurance commission, NAICOM etc, was
established and in 2009, the CBN under the immediate past governor proff.
Charles Soludo, applied for membership of Islamic finance service board and got
admitted in taking cognizance of the fact that the operational license can not
be granted without a supervisory/ regulatory framework. The CBN decided to
expose the draft framework on non interest banking for the comments and inputs
by industry stakeholders.
The legality of the non interest Islamic
banking is derived from section 33(B) of the Central Bank of Nigeria Act of
2007 which states that in addition to any of this powers under the act. A
guideline was left for comment about the introduction of Islamic banking for
eight months by the stakeholders and released in January 2011. It was further
revised in June 2011 to address some stakeholders observation.
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