Mr Haruna Musa is the Managing Director and Chief Executive Officer (MD/CEO) of Jaiz Bank, Nigeria’s premier non-interest bank. In this interview on the sidelines of the 2024 Islamic Development Bank (IsDB) meetings, he highlights the bank’s efforts in boosting capital and other operations, as well as the significance of the $20 million capital injection agreement signed with the Islamic Corporation for the Development of the Private Sector (ICD).
What is the significance of the agreement signed here today?
We signed an agreement by way of a Memorandum of Understanding (MoU) for $20m tier one capital injection into Jaiz Bank. Tier one capital means they are providing funds in terms of equity which we can use to substantially support our operations in Nigeria.
Is this part of your effort to meet the new Central Bank of Nigeria (CBN) requirement for recapitalisation?
It’s more of supporting the working capital, because after the announcement for recapitalisation by the CBN, the qualified capital for Jaiz Bank is about N18.7bn currently, and the requirement by CBN is about N20bn for our own categorisation of bank – that is non-interest banks – we will have an additional N10.4bn to be combined with the current N18.7bn qualified capital by CBN which will now propel Jaiz Bank to N29bn in terms of capital; even exceeding the capital requirement of CBN.
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Consequently, I am very confident that Jaiz Bank will be among the first to meet the CBN’s capital requirement.
What is the vision of Jaiz Bank as far as its operations in Nigeria are concerned?
Jaiz Bank has been in operation for about 12 years. Of course, we are the leaders in terms of non-interest banking, but we just concluded a strategic exercise by our board. Our first vision is to be a tier one bank in Nigeria in the next five years. We want to be leading ethical banks in Africa.
Secondly, we plan to continue growing our operations by upscaling our balance sheet at the rate of 35 per cent year-on-year. We also want to enhance our customer acquisition to be acquiring a minimum of one million customers year-on-year.
With that, we see our bank upscaling in terms of our operations; to grow from our current balance sheet size of about N2.5trn. In terms of income and cost, we want to move from our current turnover to over N100bn per annum in the next five years.
Subsequently, a lot of things are happening in the bank currently. We have accelerated our product expansion using digital channels. We will migrate to digital operations, and we are very happy with the current conference of IsDB in Riyadh. We have been able to meet so many strategic partners that assist Jaiz Bank in meeting up with the aspiration of becoming the indisputable leader in non-interest bank not only in Nigeria, but in Africa, in the next five years.
One of IsDB’s key missions is poverty reduction and general development across member countries. With Nigeria having one of the highest poverty rates in the world, where do you see Jaiz Bank working with IsDB to help fight poverty in the country?
We are trying to upscale our operations, especially in terms of Small and Medium-Enterprises (SME) support. Today, SME is the engine of employment growth in the country. We believe the journey has started as we all know the focus of IsDB is to ensure that at least they support and alleviate the poverty of their member countries, especially Nigeria. We are very conscious of that, which is why as part of our strategy, we are focusing on inclusive growth. We are not only mindful in line with our principle of critical banking; it is not all about the bottom line, we are also concerned about transforming the lives of the citizens of Nigeria.
This conference has truly opened our eyes. We have seen an investment of over N26bn by IsDB in Bangladesh, and we have also seen their investment in transforming waste to energy. I really think there is a lot of value Nigeria can extract from the IsDB Group.
Honestly, we should spearhead being the catalyst of ensuring that all these tactical flaws are coming to impact positively on all the citizens of Nigeria to ultimately reduce the poverty rate of the country.
What do we need to do practically to unlock all these opportunities that you have mentioned?
The Minister of Finance was here. I am happy to see various organisations here. Also, I must say that it’s very important for us in the financial services industry, and I think such kind of exploration visits will go a long way in unlocking such kinds of opportunities and also tap into the opportunities; that way it can transform the people in our country.
The opportunity is described as “mudarabah capital”; can you talk us through what it actually entails?
The concept of Islamic banking or non-interest banking is about partnership. I attended a forum in the morning and someone from Turkey mentioned that they referred to their own model of banking as partnership banking. What we should all understand is that you join your capital or take deposits from your customers, then engage in businesses and then share the profit from the businesses.
The concept of Islamic banking prohibits interest, but it allows the sharing of profit. For instance, if you are saving with Jaiz Bank, every month we share the profit along with you, unlike conventional banking that has a fixed rate of return to be given to you. Our own rate of return depends on how much we make.
In the context whereby the capital is coming from ICB, does that mean that the markup you get from the in-capital will be shared between Jaiz Bank and ICB?
Yes! In line with that, every country has their own risk rating.
There is also the SOFR rate, which is a standard rate for attracting capital. It is about five per cent today. They always add country risk to ensure the overall cost will be in the regional; could be nine per cent to 10.5 per cent maximum.
Give us an update on what to expect in the short to the long run?
We believe that soon we are going to revisit our application to CBN in terms of growth cooperation. Holding company provides us an opportunity to focus on Fintech. I saw a Fintech bank at one of the occasions, and I was very impressed by the kind of transformational growth they have been able to achieve over the last three years. Honestly, it is very phenomenal. Jaiz was also planning to start with Fintech, and we also have other outlets we intend to do to enable us to move to other parts of Africa.
Today, ICB has confidence in Jaiz Bank, and they would like to see an opportunity where they will be injecting their capital for expansion to Africa through the likes of Jaiz Bank, which we are very positive about not only in Nigeria, but in Africa.
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