‘We have grown our deposits from N3 billion in 2012 to N46 billion today’
Hassan Usman is the CEO/MD of Jaiz Bank, the only full-fledged licensed Non-Interest (Islamic) bank in Nigeria today. He shares his experiences in his maiden Newspaper interview with John Osadolor and Bashir Ibrahim Hassan on the achievements of the bank from inception to date and his plans on further value addition to Jaiz’s customers. Excerpts:
How would you rate yourself from when you began operations to this moment?
I’m one of the privileged members of staff of Jaiz Bank. I say privileged because I was there at inception. I joined in 2005 and that is now 11 years. So, I have seen it play out somehow and I was actually interested in the project even before I joined. I use to attend the road shows that took place before the establishment of Jaiz International which was the vehicle that transformed into Jaiz Bank. It is part of what for a long time I wanted to do. To be part of an institution that will be a niche, to provide an alternative financing model that complements what the mainstream finance is all about. I salute my pioneer colleagues for a shared vision.
I am now the substantive Managing Director. So it has dawned on me that the task of moving Jaiz Bank from a niche to the mainstream of the financial system in Nigeria is squarely on my shoulders. Working with a team that we share the same type of vision, we have to work round the clock to deliver on that commitment. We believe there is a place for Islamic finance or non-interest banking, whatever you want to call it because there are people who otherwise will not be in the financial system. They would rather be elsewhere and that would be a loss to the nation because resources that otherwise would be used to develop the economy will be idling somewhere. Money that is not in the banking industry is money that is dead as it does not contribute significantly to the economy.
From a project perspective, we worked to raise capital to be able to get a license in 2003 to early 2004. By March-April of 2014, Jaiz International applied to the Central Bank of Nigeria (CBN) during the time of Joseph Sanusi, the then Governor to get a license for a full national bank. The capital requirement then was N2 billion and we raised N2.5 billion at the time. With no track record, just green, we did an IPO, had over 20,000 shareholders, raised over N2 billion.
When Prof. Chukwuma Soluduo assumed office as the Governor of Central Bank, as an economist, he had a very big vision for the banking industry. He raised the capital beyond our reach at that time, from N2 billion to N25 billion which was huge really. We tried to raise capital but unfortunately to the foreign investors it was a bit strange for a new bank to start with $200 million(N25bn). We started the process to get a license earlier than the first Islamic bank in Britain- Islamic Bank of Britain which is now called Al Rayan which got its license with about $14 million capital. At probably N130 to a dollar which was the exchange rate then, what Al-Rayan paid would have been the equivalent of about N1.8 Billion in Nigeria. So, why should the regulatory authority require $200 million for an equivalent bank in Nigeria, foreign investors queried? Al Rayan got its licence in UK and started business 2004 but we couldn’t because the investors who would have put this money did not understand why the capital was so high in Nigeria especially at a time when there were no compliant instruments for an Islamic bank to invest those funds in and no regulatory framework. Nonetheless we continued the struggle aided by an in principle approval given to us by Governor Soludo which provide the motivation to carry on. To the credit of the former Deputy Governor of CBN, Tunde Lemo, he played a very key role in kick starting the capacity building for non-interest banking. I remember he led a team to Malaysia to study what Islamic banking is all about at such a time when there was so much controversy on the introduction of Islamic banking.
Then came Sanusi Lamido Sanusi who did some changes to the Soludo consolidation and created regional banks and specialized banks that could operate with lower capital. He also ensured a robust framework for Non- Interest Banking is created to enable an orderly birth of Islamic Banking in Nigeria. A very courageous man whom history will record as the enabler of Non-Interest Banking in Nigeria. So, we were licensed and got approval to commence banking operations.
We commenced business January 2012 and grew our balance sheet from 12 million to now about 60 Billion. We have over 150,000 customers cutting across the religious divide, our products offerings have also grown substantially ranging from our friendly retail to commercial and corporate products. We have grown our deposits from N3 billion in 2012 to N46 billion and our assets financing has reached over N30 billion today.
Can you shed more light on this vision because there is a vision for the bank and your vision as the leader of the bank? So, what is your vision?
With all sense of modesty, we initiated the major elements in crafting the vision. Our vision is to be the dominant non-interest financial institution covering the entire Sub Saharan Africa and not just Nigeria. So, when we were looking at what Jaiz will be, we were not just looking at Nigeria, we were looking at the Sub Saharan region. We never had a vision that we will have a bank that will serve just Nigeria, we never thought about that. Of course, we believe that Nigeria is the major player, dominant player in the region and so if we succeed here, we will definitely succeed in the rest of the region and to use the region as a platform to launch to other regions of the world.
I would think that in another ten years, the second leg of the vision that I just mentioned will come in definitely because my colleagues that will inherit this institution will not be content with just doing business in West Africa or the Sub-Saharan Africa. They will be looking at how to be in the Middle East, partner in the Far East and operate in Europe and the Americas
How do you measure your capacity now, regulatory and operational capacity compared to the period of inception?
We have done a lot of training locally and continue to do so in collaboration with other operators. Again, from the regulation and fiscal elements that support monetary policy, there is still the need for instruments; infrastructure for non-interest banking needs to be addressed. The regulatory framework and issues about supervision is satisfactory but there is the aspect of the other infrastructure in terms of having liquidity instruments which are still wide open. On our part, we have recognize that this is a new concept, and so we need to train our staff and ensure adequate awareness of the public and our customers. Our products have their specific peculiar characteristics and operational risks that must be taken care of to avoid losses.
Do you believe the CBN has the capacity to carter for your needs?
As I said, the CBN has done a lot and I have to give them that credit. I mentioned earlier that the former CBN Deputy Governor, Tunde Lemo spearheaded a very vigorous training programme for a number of key officers of the CBN and desk officers as well on the basis of which Sanusi built on vigorously. However, CBN alone cannot provide the infrastructure that we are looking for. The Ministry of Finance is responsible for whatever fiscal policy that supports monetary and financial market. The Debt Management Office is responsible for issuing bonds and for non-interest banking or Islamic banking, there is an equivalent Sukuk which we expect the DMO to rollout. They have had a timetable which they modified based on which we are expecting Sukuk to be issued by year end.
How prepared are you to benefit from the Sukuk were it to come into being?
We are more than prepared. Already, we are bleeding because of lack of it because today, I must keep some liquidity and even without regulation, as a bank we must have some form of liquidity because I don’t know who will come to ask for their money. But regulation wise, I have to keep a threshold of liquidity which for a conventional bank there are instruments. For non-interest banking, there are no instruments yet. So, you keep the money as it is with the CBN and you earn nothing from that. If we have had this instrument from inception, the story would have been different.
Yes, we had a record breaking-even within the first three years of our operations which if really you look around is a record for Islamic banking worldwide. With appropriate instruments we would have done even better, we would have had no inhibition in driving to get more deposits because for us we can only earn if we do business. The reality is that we needed to have Sukuk and similar instruments.
How do you manage non-interest banking in an environment like Port-Harcourt?
When we commenced operations back in 2012, the first three customers that took facilities from the bank are not Muslims. If you look at last year’s published accounts, you will see the testimonials of non-Muslim customers of ours and their experiences in interacting with us. If people know what Islamic banking is at least from a point of view of someone who is looking for financing, I can say if such a person knows the principles that govern the way we interact with you as a borrower, you will not go to a conventional bank. I am saying this as a matter of fact.
In Port-Harcourt we talk to people from the point of view of what we are bringing to the table. But this is how we operate; we do not ask people what religion they practice. I can tell you Port-Harcourt is doing fine and I believe it will be one of our most profitable branches. There are businesses especially in the oil service sub-sector that are eager to do business with us.
There are banks that offer non-interest window. How is the market playing out?
We see them today as collaborators. There is space for all of us and the market is at its infancy for all of us. We require new institutions to come to the market because it is then that we can grow the market and also have counterparts. Competition is good; it validates the concept and the business. It also makes you not to go to slumber, not to take your customers for granted because there is the psychological feeling that look there are alternatives for the customer.
How do you relate with the small and medium enterprises (SMEs). How do you share profit with them?
We have a programme for the SMEs. You know they don’t have the usual collateral to give so we have that programme. Usually, we like to address them through organized settings either cooperatives or business groups or clusters because by their nature we cannot hold or insist on them to put a collateral. However, because we hold money in trust, we have to ensure that whoever takes it is not running away with depositors’ money and he is also able to develop himself in the first place because money wasted is a waste to the economy and missed opportunity for the beneficiary. So, we try to address them in clusters so that they can have joint guarantees. In this way we won’t insist on collateral.
As to the mode of profit, we usually would look at what they want because we don’t sell money here, we finance. Whatever you do, it will involve some financing. If you are an SME say you are a tailor and you need sewing machines, we buy the sewing machines and give to you on higher purchase kind of arrangement. So, overtime you buy us out and that is how it would work. If you are manufacturing something, we buy the raw materials and sell to you and then you pay us gradually because the financing is the delay in payment and that is what banks are doing. They give you money and delay the repayment; we sell goods and give customer time to pay so that is the difference in this respect.
Awareness has been created for a while about non-interest banking but you still appear to be the only full-fledged player in the country. What in your view is responsible for this?
When Sanusi Lamido came and made the entry barriers less burdensome, I am aware of only about three banks- Rand came, and we had some conversions to commercial banking licences; these are all conversions; the real new bank that came into the market is a foreign bank, Rand Merchant Bank (RMB). This is not for lack of competitiveness in the sector. In fact, for banking industry that has bonds selling at 14-15 percent, you can see that they have better environment to come. Banking is a heavily regulated business and in Nigeria the time to market is quite long.
Maybe, those entrepreneurs who are looking the way of non-interest banking have different view because right now there are people who are trying to raise capital to get license for Islamic finance. Again, I feel that if we had had the instruments, we would have seen these banks coming in because there is market to tap, there is a niche to create and this niche is big and there is potential. If you have the right vision, you will see that there is real potential for people to play very well in this subsector. Right now the ground is ready and I believe by early next year, you will see one or two more of them coming.
What legacy would you like to leave behind, the sacrifice you have made for the development of non-interest banking in Nigeria?
It is a privilege to be here and when I leave this desk, I want to leave Jaiz a very efficient, profitable, fair and balanced to all stakeholders. We would have left behind an institution that is a first choice to all Nigerians looking for a place to save hard earned money or looking for financing to support business or life style. I would like to leave a very profitable organization that is at peace with its various constituents.
Unlike the conventional banks, our depositors are like part owners. I want them to be happy; I want our shareholders to also have decent returns. I also would like to have Jaiz that is respected in the area of corporate social responsibility (CSR). I want us to impact very positively on the society through our CSR which is being done through the Jaiz Charity and Development Foundation. I hope that by the time I leave here, Jaiz would have positioned itself to go to the next phases which is the West African and Sub-Saharan markets.
John Osadolor and Bashir Ibrahim Hassan