What Are Islamic Banks? List Of Islamic Banks In Nigeria: Their Origin, Growth And Details (2024)

What Are Islamic Banks? List Of Islamic Banks In Nigeria: Their Origin, Growth And Details

What Are Islamic Banks?

Islamic banks are known as financial institutions that operate according to Islamic law, also known as Shariah.

In the steps below are the eye opening information about what exactly Islamic banks are:

Principles: Islamic banks are known for follow principles that prohibit the payment or receipt of interest (riba), and they also avoid investing in businesses that are considered haram (forbidden) according to Islamic law, such as those related to alcohol, gambling, or pork.

Profit-sharing: Instead of charging interest on loans, Islamic banks often use profit-sharing arrangements.

For example, in a murabaha contract, the bank buys an asset and then sells it to the customer at a higher price, allowing the customer to pay in installments.

Risk-sharing: Islamic banking emphasizes the concept of risk-sharing between the bank and its customers.

This means that both parties share in the risk of any business or investment activity.

Asset-backed financing: Islamic banks usually engage in asset-backed financing, where the financing is backed by tangible assets.

This is in contrast to conventional banks, which often engage in debt-based financing.

Islamic finance products: Also, Islamic banks offer a range of products that comply with Shariah principles, including Islamic savings accounts, Islamic mortgages (known as murabaha or ijara), and Islamic investment funds.

Regulation: Many countries with significant Muslim populations have specific regulatory frameworks for Islamic banking to ensure that these institutions comply with Shariah principles.

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Let’s move ahead to knowing the origin of Islamic banking in Nigeria.

Origin of Islamic banking in Nigeria Today

Islamic banking in Nigeria has an interesting origin that can be traced back to the early 2000s.

The development of Islamic banking in Nigeria arose from a relationship between various human and non-human actors.

After several years of attempts by different groups and organizations, Islamic banking finally received approval from the Central Bank of Nigeria in the year 2011.

The concept of Islamic banking itself is rooted in Islamic beliefs, which prohibit dealing in interest (riba) and promote equity and fairness.

As mentioned earlier, Islamic banking operates on a profit and loss sharing basis, where customers and the bank share in the risks and rewards of business and investment activities.

While conventional banking has its origins in the Babylonian City of Mesopotamia (now modern Iraq) around 500 years ago, Islamic banking has its roots in the Islamic tradition.

Islamic banking in Nigeria is based on the principles of Shariah law, which guide the operations and activities of Islamic financial institutions.

The introduction of Islamic banking in Nigeria has provided an alternative financial system for Muslims and non-Muslims alike who wish to engage in ethical and Shariah-compliant banking practices.

It has also contributed to the growth and development of the Nigerian economy by attracting new investors and promoting financial inclusion.

Before getting to show you the list of Islamic banks in Nigeria in 2024, let’s see the the growth details of Islamic banks in Nigeria.

Growth Details Of Islamic Banking In Nigeria

Islamic banking in Nigeria has experienced significant growth in recent years, contributing to the country’s financial system and providing an alternative financial system for both Muslims and non-Muslims who seek Shariah-compliant banking practices.

In the following section are some detailed growth details of Islamic banking in Nigeria:

Increasing Market Share: According to Fitch Ratings, Islamic banking assets in Nigeria witnessed a remarkable 71% year-on-year increase in the first half of 2022.

However, you need to note that Islamic banking still holds a relatively small market share, accounting for only 0.8% of the total industry assets.

Despite this, the growth is promising, indicating a rising demand for Shariah-compliant financial services.

Government Support: The Nigerian government has been actively driving the growth of Islamic finance in the country. Fitch Ratings also reports that the government’s efforts have contributed to the expansion of the Nigerian Islamic finance industry, which is estimated to have reached USD 2.3 billion by the end of the year.

The government’s support includes the issuance of sukuk (Islamic bonds) and the implementation of policies that promote Islamic banking and finance.

Sukuk Market: One of the key drivers of Islamic banking growth in Nigeria is the sukuk market.

Sukuk are Islamic financial instruments that represent ownership in tangible assets.

The exponential growth of the sukuk market has played a significant role in the overall expansion of Islamic banking in the country. Investors, both local and from the Middle East, have shown increasing interest in sukuk investments, contributing to the growth of the Islamic finance industry.

Islamic Fund Management: Another factor contributing to the growth of Islamic banking in Nigeria is the development of Islamic fund management.

This sector has witnessed significant activity, attracting investors who seek Shariah-compliant investment opportunities.

The growth of Islamic fund management has further diversified the range of Islamic financial products available in Nigeria, catering to the diverse needs of customers.

Real Estate Market: The real estate sector has also played a role in the growth of Islamic banking in Nigeria.

Islamic banks have actively participated in financing real estate projects, offering Shariah-compliant alternatives to conventional mortgage products.

This has provided individuals and businesses with access to financing options that align with their religious beliefs, contributing to the overall growth of Islamic banking.

Now let’s explore the full list of Islamic banks in Nigeria in 2024.

List Of Islamic Banks In Nigeria In 2023

Here is a list of Islamic banks in Nigeria:

Jaiz Bank: Jaiz Bank is Nigeria’s first fully-fledged non-interest banking institution.

It operates based on Islamic principles and offers a range of Sharia-compliant financial products and services.

The bank is headquartered in Abuja and has branches across the country.

TAJ Bank: TAJ Bank is another Islamic bank in Nigeria that provides Sharia-compliant banking solutions.

It offers various services, including savings accounts, current accounts, investment accounts, and financing options.

TAJ Bank aims to meet the financial needs of individuals and businesses while adhering to Islamic principles.

Lotus Bank: Lotus Bank is a relatively new Islamic bank in Nigeria.

It offers a wide range of Sharia-compliant financial products and services, including savings accounts, investment accounts, and financing solutions.

Lotus Bank aims to contribute to the growth and development of the Islamic finance industry in Nigeria.

Al Baraka Bank: Al Baraka Bank is a subsidiary of Al Baraka Banking Group, a prominent Islamic banking institution with a presence in various countries, including Nigeria.

The bank operates in accordance with Shariah principles and offers a range of Shariah-compliant financial services.

These services include deposit accounts, financing, investment services, and other banking products tailored to meet the needs of customers seeking Islamic banking solutions.

Islamic Development Bank (IDB) Nigeria: The Islamic Development Bank is a multilateral development finance institution headquartered in Saudi Arabia, with a regional office in Nigeria.

The bank is dedicated to promoting economic and social development in member countries through the provision of financing and investment services that align with Islamic finance principles.

In Nigeria, the IDB plays a crucial role in supporting various development projects and initiatives that contribute to the country’s growth and progress.

FAQs On What Are Islamic Banks? List Of Islamic Banks In Nigeria: Their Origin, Growth And Details

Here are some helpful frequently asked questions on What Are Islamic Banks? List Of Islamic Banks In Nigeria: Their Origin, Growth And Details with their respective answers:

Is Jaiz Bank an Islamic bank?

Yes, Jaiz Bank is indeed an Islamic bank. It is Nigeria’s first fully-fledged non-interest banking institution, operating in accordance with Islamic principles and offering a wide range of Sharia-compliant financial products and services.

Which bank is best for Islamic banking?

The determination of the “best” Islamic bank can vary based on individual preferences and specific financial needs.

However, some of the prominent Islamic banks in Nigeria include Jaiz Bank, TAJ Bank, Al Baraka Bank, and Islamic Development Bank (IDB) Nigeria.

Each of these banks offers Sharia-compliant financial services and products, catering to the diverse needs of customers seeking Islamic banking solutions.

Which bank is Islamic mortgage in Nigeria?

In Nigeria, Islamic mortgage or home financing options are offered by several Islamic banks, including Jaiz Bank, TAJ Bank, and other institutions that specialize in Sharia-compliant financing.

These banks provide mortgage facilities that adhere to Islamic finance principles, allowing customers to acquire homes through Sharia-compliant financing arrangements.

What type of bank is Islamic bank?

An Islamic bank operates based on the principles of Islamic finance, which prohibit the payment or receipt of interest (riba) and promote ethical and socially responsible financial practices.

Islamic banks provide a range of Sharia-compliant financial products and services, such as profit-sharing investment accounts, Islamic mortgages, and other financial instruments that adhere to Islamic principles.

Do we have Islamic bank in Nigeria?

Yes, Nigeria is home to several Islamic banks that offer Sharia-compliant financial services. Some of the notable Islamic banks in Nigeria include Jaiz Bank, TAJ Bank, Al Baraka Bank, and Islamic Development Bank (IDB) Nigeria.

These institutions provide alternative banking options for individuals and businesses seeking financial services that align with Islamic principles.