The House of Representatives has called on the government to through the Ministry of Finance and Central Bank of Nigeria, CBN, provide a policy that will allow commercial banks render non-interest banking services to stimulate the economy.
This was contained in a motion moved by Kabir Ibrahim Tukura, a member from Kebbi State, adopted at the plenary on Thursday.
Presenting the motion Mr. Tukura said, non–interest banking, also known as Profit and Loss Sharing (PLS) banking system prohibits the payment of interest in all ramifications and then adopts the principle of profit and loss sharing between the parties.
He noted that under non–interest banking, both the investor and the entrepreneur are partners, while profit or losses made are shared according to the stake and sharing formula based on level of financial commitment and participation by each party.
“Non-interest banking encourages asset banking as financial transactions are tied to tangible assets like real estate investment or investment on goal, which usually appreciates over time and does not depreciate,” he said.
Mr. Tukura however noted that ”conventional banking is an interest-based system whose relationship with their customer is that of creditor and borrower, and interest is fixed in advance and risk or loss is only incurred by the borrower.”
The lawmaker said, ”a large number of Nigerians, especially from the Northern part of the country, do not take loans with interest due to religious concerns.”
According to him, such people are being short changed from benefiting from government policies and stimulus packages which contribute to the slow economic growth of the region.
“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.
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,” he added.
The House therefore resolved to look into the issue and the motion was referred to the House Committee on Banking and Finance for further legislative action.
Mercy Chukwudiebere
