Why Jaiz Bank won’t give cash under contract sharing agreement –Usman, Managing Director

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By Omodele Adigun

Despite the fact that Islamic finance or non-interest banking has been with us for close to a decade now, many people still can’t get their heads round its mode of operations. According to Mr. Hassan Usman, the managing diretor of Jaiz Bank, “whether you understand it or you are aware of it, when you go to your bank, when  you put money in your current account, what you have done is that you have given the bank a loan. That is the contract, the underlying contract. It is similar also when you come to conventional banking and  when you come to the non-interest banking,” Usman, however, waded through the labyrinth in this interview in Lagos, recently to separate the wheat from the chaff  .


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Modus operandi

Conventional and non-interest (banking) are the same because they have current account operation. The contract is that of a loan.Whether you understand or you are aware of it, when you go to your bank, when  you put money in your current account, what you have done is that you have given the bank a loan. That is the contract, the underlying contract. It is similar also when you come to conventional banking and  when you come to the non-interest banking, the only difference is that, if you can recollect, some years back, the conventional banks were even paying interests on current account, depending on your utilization, but we (non-interest banks) can not;  it is not possible for us to pay anything on the current account because it is a loan. We don’t also charge Commission on Turnover (CoT) on the current account. So you can also see some of the differences. They (conventional banks) also have the possibility of paying an interest if they so desire or if the competition in the economy dictates that. They also charge CoT and we don’t charge that. And when you are a depositor and you want to earn from a non-interest bank, that means you are a partner to the bank; you are a semi-equity holder; you are not an ordinary shareholder. You have given the bank an asset to invest for you like an asset manager. That is what a non-interest bank will be for you because we can not pay you a straight interest. What we have taken  is your deposit because you want to earn on it; and we are going to manage it. When we make profit, we will share it 70:30 or 60;40 like that. And that is what we will agree. And then, it will translate into five per cent or six per cent or 8 per cent per annum. And you can see post-event, after we have made the profit. That is on the deposit side.

And on the assets side, a conventional bank can give you a loan at so so per cent, depending on your utilization; interest will be calculated on the absolute amount. If it is fixed rate per annum, you will know; if it is a term, there will be an instalmental payment. The interest is also fixed and it is known. And they will give you the  money in cash. All conventional banks don’t have any other way to finance but to give you a loan.

But in a non-interest banking, there are free contracts that you can do. The first contract is the contract of sale. For example, you want this book, and you don’t have the money, I buy it and sell to you with mark up.You know how much I bought the book? N1,000! I am selling it to you at N1,200. Pay me the money. Absolute price flows. Things can not change, You can not change it because it is a sale. If this could be a machine or a house, I can lease it to you with an option of buying me out over a period of time. This is another contract. I can also share the contract. You are my partner now, I  would give you the money. But the only way we can have cash is if we can lose it. But if the contract does not provide for us to lose the money, that means it can not be provided for under profit and loss. Then we can not give you cash;we cant give you cash and post negative return on it. So this is the difference. It is not difficult to understand.It is either lease or sale or you have to share the contract.


Sharing contract is the one we bring 50:50; I bring N50 million: you bring 50 million, we put it into the business and we share the profit. Or maybe as an entrepreneur, you don’t have money but, for example, you can develop an App, I give you  N50 million. You develop the App and we then share the profit because I am the one that provided the capital.

The Bank

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Jaiz Bank is a medium sized organisation. By now the public is aware of how non-interest bank operates.Now Jaiz Bank is quite popular because we have engaged in this course 10 years ago. Today, I am happy to say that Jaiz Bank is the pioneer of non-interest bank in the country.

Many of you have been following our story, you have seen how we have been growing from a balance size of N12 billion by December 2012, to almost  N300 billion by 2021, that is, within a space of 10 years. This is a especially in the last five years, 2016 , to date, we have been growing at about 40 per cent average annual growth. We are poised for the next five years of growth. This is the period of rapid  growth for us as we consolidate. Yesterday (previous day of the interview), I was in Akure, Ondo State capital, as we opened our 45th branch. So we are doing everything possible to make sure that we spread the branch network and enable as many people as possible to be onboarded  the non-interest banking such as Jaiz Bank.

We believe that you will continue to support us, make  us visible as much as possible  and create more awareness of the products  as well as emphasise the advantages of the financing options that are available to individuals, small and medium enterprises, corporate as well as the government in terms of the overall  interest and social needs of the country.


SMEs are a strong focus for Jaiz Bank, because  we believe that this is the area we can make strong contribution towards empowerment and increased financial inclusion. Today, we have roughly 20 to 25 per cent of our portfolio in SMEs.

What we are doing to support SMEs is that we have various products for micro (entrepreneurs) and women groups, we provide equity. You know we are non-interest bank, we can do profit sharing, arrange contracts among other things. The first of these contracts are equity bids. These women groups, we provide capital for them to go and trade and we will share their profit and loss.

We also have the same product where small enterprises buy either raw materials or equipment. We buy raw materials and equipment and sell to them as a mark up. This is another way to support their capital or their working capital.

Of course, in between these two products, you can have a combination. These products can also be applied at the large corporate level.