PRESS RELEASE 

One of the major thrusts of the current banking reforms being pursued by the Central Bank of Nigeria (CBN) is the introduction of non-interest bearing banking or Islamic banking to the Nigerian financial system.  The establishment of non-interest bearing banks is usually associated with three major objectives.  These objectives are to provide interest-free alternative to conventional banking, to facilitate an equitable distribution of income and wealth and to promote economic development and stability.

It was in the light of the above objectives that the Central Bank of Nigeria (CBN) commenced current efforts towards licensing and subsequent regulation/supervision of non-interest bearing banking institutions in Nigeria.  In order to provide a level-playing field for all deposit-taking financial institutions, including Islamic deposit-taking financial institutions, and ensure that holders of shariah-compliant products are adequately protected, the Management of the Corporation had proactively commenced the process that would facilitate the extension of deposit insurance coverage to non-interest bearing financial institutions when they are eventually licensed.  Part of this process was the sending of five staff of the Corporation on a study visit to the Malaysia Deposit Insurance Corporation (MDIC).  The choice of MDIC stemmed from the fact that among all the countries practicing Islamic banking, Malaysia was the first to extend deposit insurance coverage to such non-interest bearing institutions.  Besides, the Malaysia Deposit Insurance Corporation had achieved remarkable success in operating a dual Deposit Insurance System (DIS) that comprises a DIS for conventional deposit-taking financial institutions and a DIS for Islamic financial institutions and/or conventional banks operating a subsidiary Islamic bank or windows for Islamic products/instruments.

The main objectives of the study visit were as follows:

a)      To give the participants first-hand knowledge of the principles and practice of Islamic Banking and Deposit Insurance;

b)      To expose the participants to the rudiments of Islamic banking regulation and supervisory processes; and

c)       To demonstrate in concrete terms the Corporation’s seriousness and preparedness towards extending deposit insurance coverage to and subsequent regulation/supervision of Islamic banking institutions that would soon be licensed.

During the duration of the programme, out of the five-day visit, three days were spent at MDIC dealing with issues in Islamic Deposit Insurance, while two days were spent at Bank Negara Malaysia (BNM), Islamic Financial Services Board (IFSB) and International Centre for Education in Islamic Finance (INCEIF) learning and discussing the issues involved in the regulation and supervision of non-interest bearing financial institutions.  Some of the papers presented during the study visit included the following:

a)      An Overview of Malaysia’s Islamic Deposit Insurance System (IDIS)

b)      Islamic deposits and their insurability

c)       Premium calculation

d)      Establishment and management of Islamic Deposit Insurance Fund (IDIF)

e)      Utilization of IDIF in the event of an Islamic banking institution’s failure

f)       Funding in the event of deficit

g)      Regulation and Shariah governance frameworks of Islamic banking Industry

h)      Malaysia International Islamic Financial Centre (MIFC)

i)        Supervision of Islamic Banking Institutions

j)        Islamic interbank money market

k)      Islamic Financial Services Board (IFSB)

l)        International Centre for Education in Islamic Finance (INCEIF)

m)    Issues and Challenges of IDIS

It is hoped the study visit will further develop the talents and enhance the human capital of the staff in Islamic finance in general and Islamic deposit insurance particular.