Embrace interest-free banking, Reps urge CBN, others

The House of Representatives has urged the Federal Government, especially its financial institutions to create more interest-free banking opportunities for Nigerians.

This was specifically directed at the Federal Ministries of Finance, Budget, and National Planning; Agriculture and Commerce (now Industry, Trade and Investment).

The House ask them to provide “a deliberate policy that will encourage the Bank of Industry, the Bank of Agriculture, Nigeria Incentive-Based Risk Sharing system for Agricultural Lending, micro-finance banks, and other government-owned financial institutions to provide non-interest banking to their customers.”

It also urged the Central Bank of Nigeria to review its current policy on non-interest banking and direct the Development Bank of Nigeria and commercial banks to integrate same into their systems.

It urged the CBN to review its policy on non-interest banking to allow commercial banks “carry it out as a product rather than having to acquire a separate license for non-interest banking as is obtainable currently.”

These resolutions were based on a motion moved by a member of the House, Kabir Tukura, which was unanimously adopted at the plenary on Thursday. It was titled, ‘Need for Banks to Adopt Non-Interest Banking System to Stimulate the Economy.’

Moving the motion, Tukura said, “The House is concerned that conventional banking is an interest-based system whose relationship with their customer is that of creditor and borrower, where interest is fixed in advance and risk or loss is only incurred by the borrower. A large number of Nigerians, especially those from the northern part of the country, do not take loans with interest due to religious concerns, which thus short changes them from benefitting from Federal Government policies and stimulus packages and is constituting one of the major reasons for the slow economic growth of the region.

“The House is concerned that Nigeria’s lending rate, in conventional banking, is one of the highest in the world, and creates serious hardship, particularly on low–income earners, most especially in this period of the COVID–19 pandemic. The House is disturbed that with higher interest rates, interest payments on credit cards and loans are more expensive, consequently discouraging people from borrowing and spending with the attendant decrease in consumption.”

Non-interest banking, he contended, would encourage asset banking with financial transactions tied to tangible assets such as real estate investment or investment which would not depreciate