Impact Of Shariah Governance On CBN Guidelines On Non Interest Banking

Project and Seminar Material Under Islamic and Arabic Studies

Project and Seminar Material Under Islamic and Arabic Studies

Chapter One


1.1 Background To The Study

The most recent and significant development in the banking industry is the emergence of Islamic Banking System and Interest-Free Banks (IFBs) in Nigeria through the CBN guideline on non interest banking. This is in response to the failure of the conventional interest based banking system to cater for the developmental needs of the country which also apply to other developing economies (Ahmed, 2000).

According to Adebayo (2010), many Muslims are not satisfied with the operation of the conventional interest-based banking system which is against the spirit of their religion and would have prefer a banking system within the Sharia governance framework. They are however incapacitated by the fear of exposing their money to risk of theft should they decide to keep their money at home, or the fact that their wages will be paid to them through the banks, or rather, some other unavoidable transactions with these conventional banks which do not operate in line with the dictate of Allah. Those who opted for current accounts with these banks still stand the risk of moving in the periphery of usurious transaction, as this product has percolated element of interest to customers as well.

The Central Bank of Nigeria recently joined other countries like Turkey, Jordan and Malaysia to come up with specific guidelines and regulations for the establishment of Islamic banks, with the difference that she (Nigeria) opted for non-interest banking just like Turkey which refers to it as “Special Finance House” and it’s within the framework of Sharia governance. This gives a sign of relief to the Muslims who were not satisfied with the transaction of the conventional banks, following the replacement of the Banking Law in Nigeria (Banking Act of 1962) with the 1991 Banks and other Financial Institutions Decree (BOFID), which came with the necessary framework for the establishment of Profit and Loss Bank in Nigeria. On March 4, 2009, another Draft Framework for the Regulation and Supervision of Non-Interest Banks (NIBs) in Nigeria was publicised. The objective of the Sharia governance framework is to provide minimum standards for the operation of non-interest banking in Nigeria.

Among the issues discussed inguideline include:-

  • Meaning of non-interest bank
  • Licensing requirements
  • Models of non-interest banking
  • Non-interest financial instruments
  • Corporate Governance
  • CBN Shariah Council
  • Conduct of Business Standards
  • Profit Sharing Investment Accounts, (PSIA)

The independence of the supervisory board in the mission of supervision and the consistency of Shariah ruling can contribute to an efficient Shariah governance framework. The confidence on part of the stakeholders in the product of the Islamic financial institutions generally and the Islamic bank in particular will be enhanced with the existence of an efficient Shariah governance framework. (Hamza, 2013).

The concept of Islamic Banking and Interest-Free Banking are synonymously used in Islamic Economics literature as an alternative banking framework to the interest-based conventional banking practice. Although in technical terms, there is a difference between an interest-free bank and an Islamic bank but they are sometimes used interchangeably. Ahsan (1988) defined an Islamic bank as “a financial and social institution whose objectives and operations as well as principles and practices must conform to the principles of Shariah and which avoid the use of interest in any of its operations. It stands for an alternative financial system based on Islamic ideals. It is not only a financier but also a partner in productive economic development”.

While stating the difference between Islamic Banking and Interest-Free Banking, Gusau (2000) argues that “Islamic banking system is supposed to operate completely within the Shariah in all its activities both in sourcing of funds and disbursement of the funds. It not only avoids interest in all its ramifications but also it avoids all other Islamically prohibited activities. Interest-free banking system on the other hand, does not engage in interest but there is no reason to suppose that all its other activities will be done strictly according to Shariah”.

From the above, three things have become clear, namely: Islamic Bank must;

  1. Charge no interest
  2. Conform to Shariah principles in all its operation
  3. Promote Islamic ideals

Thus, it can be seen that interest-free operation is a necessary but not a sufficient condition for a bank to qualify as an Islamic Bank. In addition to non-interest charges, the bank must promote Islamic ideals. Therefore, Interest-Free Banking Window can be described as the provision of Interest-Free Banking services by conventional banks on the basis of profit and loss sharing (PLS) principles .It is an operational strategy adopted by conventional banks in which interest-based banking services are operated alongside Islamic banking services within the same banking hall, for the purpose of meeting increasing demand from customers, improve mobilizations of savings as well as benefit from the new vista of opportunity offered by Islamic banking system. It should be seen as an integral aspect of financial globalization which entails the integration of Islamic financial system with the Western Financial System to produce global financial system.

Jaiz Bank PLC was created out of the ashes of the former Jaiz International Plc which was set up in 2003/2004 as a special purpose vehicle (SPV) to establish Nigeria’s first full-Pledged Non-Interest Bank. It is an unquoted public company owned by over 3000 shareholders spread over the six geographical zones of Nigeria.

1.2 Statement Of The Problem

According to Mannan (1976) who states that Islamic banking is an interest-free financing system essentially based on profit and loss sharing. And its operations are in conformity with Shariah governance. It is therefore, the cornerstone of the Islamic Economic System which is by definition Interest-Free. Siddiqi (1983) conceived an Islamic bank as a financial intermediary mobilizing savings from the public on the basis of Mudaraba (profit and loss sharing contract) and advancing capital to entrepreneurs on the same basis.

The bank shares the profits of the enterprise according to a mutually agreed percentage and shares these profits with depositors according to a percentage announced by the bank in advance. However, The researcher is out to assess the CBN guideline on non interest banking with a view to seeing its level of conformity with Islamic financial institutions. A juxtaposition of the guideline with the Islamic teachings will reveal some problems in the operation of the interest-free banking system shall also be considered

1.3 Objectives Of The Study

The following are the objectives of this study:

  1. To examine the impact of Sharia governance on CBN guidelines on non interest banking system.
  2. To analyze the benefits of non interest banking system in Nigeria.
  3. To identify the challenges of Islamic banking under the Sharia governance framework

1.4 Research Questions

  1. What is the impact of Sharia governance on CBN guidelines on non interest banking system?
  2. What are the benefits of non interest banking system in Nigeria?
  3. What are the challenges of Islamic banking under the Sharia governance framework?

1.5 Hypothesis

  • HO: Sharia governance does not have any impact on CBN guideline on non interest banking system.
  • HA: Sharia governance does have any impact on CBN guideline on non interest banking system.

1.6 Significance Of The Study

This study has the following significance:

This study will educate the general public on the CBN guideline for non interest banking system which is within the Sharia governance framework. Also, it will enlighten stakeholders and the general public on the benefits of non interest banking system.

This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied, it will go to an extent to provide new explanation to the topic.

1.7 Scope / Limitations Of The Study

This study on the impact of Sharia governance on CBN guideline on non interest banking system will cover the overview of the CBN guideline for non interest banking, Sharia governance and the highlights of Islamic banking.

Limitation Of Study
Financial constraint

Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint

The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

Impact Of Shariah Governance On CBN Guidelines On Non Interest Banking

Project Material Download

3,000 Naira

The complete material will be sent to you in just 2 steps.

Quick & Simple…

Step One Purchase

Make payment of ₦3,000: through USSD Transfer, Bank Mobile App, ATM Transfer, or POS Transfer to:

Access Bank PlcAccount No.: 0811003731
Name: Samphina Academy
Account Type: Current

Or Click Here to pay with Debit Card

Click Here to pay with Debit Card ($15)
GHANA – Make Payment of 60 GHS to MTN MoMo, 0553978005, Douglas Osabutey 


Step Two Purchase

Send the following details through Text Message or WhatsApp Messenger | +234-8143831497

  • Payment Details 
  • Email Address 
  • Impact Of Shariah Governance On CBN Guidelines On Non Interest Banking

The complete material will be sent to your email address after receiving your payment information | T & C Apply

  Contact Our Help Desk

You may also like:

⚠️ Need a different topic? Perform a quick search

Get A Complete Business Plan For Any Business In Nigeria

Business Plan for Businesses in Nigeria

  Business Plans in Nigeria

Impact Of Shariah Governance On CBN Guidelines On Non Interest Banking


This research material “Impact Of Shariah Governance On CBN Guidelines On Non Interest Banking” is for research purposes and should be used as a guide in developing your research project / seminar work. For no reason should you copy word for word (verbatim) as will not be liable for any who copied the material.

The aim of providing this material is to reduce the stress of moving from one school library to another all in the name of searching for research materials. This service is legal because, all institutions permit their students to read previous projects, books, articles or papers while developing their own works. According to Austin Kleon “All creative work builds on what came before”. is only providing this material “Impact Of Shariah Governance On CBN Guidelines On Non Interest Banking” as a reference for your research. The paper should be used as a guide or framework for your own paper. The contents of this paper should be able to help you in generating new ideas and thoughts for your own research. Use it as a guidance purpose only.

How to defend your research work

This is a general guide on how to defend your research work:

1. Prepare For Questions:

If you are preparing for questions that may be asked during your defense, then your answers will flow smoothly and effectively. This will prove your knowledge on the subject e.g “Impact Of Shariah Governance On CBN Guidelines On Non Interest Banking“, and strengthening your argument. Ask friends and family, read your work for them to listen to your presentation, and write down questions. You may be lucky the panel will ask you those you have already prepared on.

2. Strong Summary:

Summarizing your chapters will help keep your audience focused because it is easy for a mind to drift, so providing summaries will ensure your panel will follow along, even if they lose focus for a brief moment. Visual aides, such as graphs and power-point presentations can be very helpful. If you are going to use these, make sure you will practice your presentation with them.

3. Be Confident in Your Research Work:

Not knowing your topic “Impact Of Shariah Governance On CBN Guidelines On Non Interest Banking” inside out will cause you to struggle and ultimately fail with your defense. You need to know the subject from every angle to ensure you are fully prepared for any question that may come your way.

4. Conclusion:

Reinforce your findings to conclude your defense. The finale of your presentation should focus on proving the work that has been done. You may need to recap on what has changed and remained unchanged, if is necessary.

5 . Listen:

Before you get defensive or recite a particular answer, make sure you truly understand the question being asked. Being a good listener is an important quality, because providing an inaccurate or off-topic answer will also weaken the validity of your paper.

Samphina Academy

Samphina Academy is an Online Educational Resource Center that is aimed at providing students with quality information and materials to aid them in succeeding in their academic pursuit.