Jaiz Bank Nigeria Plc, a full-fledged Islamic lender which has operated since 2012, has reported 78.46 percent growth in profit, thanks to income from Murabaha as it continues to deepen financial inclusion.
Net income moved to N907.08 million in March 2020 from N508.68 million as at March 2020.
Gross income from financing transactions spiked by 47.32 percent to N5.51 billion as at March 2020 from N3.74 billion the previous year.
A cursory examination of the financial statement shows the earnings are bolstered by income from Murabaha, a revenue component.
Income from Murabaha corporate surged by 76.61 percent to N1.45 billion in the period under review from N821 million the previous year while Murabaha profit (retail) spiked by 76.61 percent to N636.27 million as at March 2020.
Murabaha, also referred to as cost-plus financing, is an Islamic financing structure in which the seller and buyer agree to the cost and markup of an asset.
The markup takes place of interest, which is illegal in Islamic law. As such, murabaha is not an interest-bearing loan (qardh ribawi) but is an acceptable form of credit sale under Islamic law.
It is a convenient way of financing working capital requirement of businesses. The product is used to finance purchase of inventory or raw material for customers locally. The Bank appoints the customer as its agent to source for the goods the customer wishes to buy, negotiate price, quality and quantity, and communicate the outcome of the negotiation to the Bank via presentation of a proforma invoice to the Bank.
The Bank will then purchase the goods by making payment to the supplier, while the agent takes delivery of the goods. Payment of cost plus profit is made to the Bank by customer at the agreed future date.
Despite the absence of a physical presence in some parts of the country, the Islamic lender is able to satisfy customer needs through mobile and internet banking.
“We have already started a pilot financial inclusion drive. We are also going to use agency banking to reach those people in places where we are not physically present,” said Hassan Usman, managing director/Chief executive officer of the bank.
Historical Background
Jaiz Bank was created out of the former Jaiz International Plc which was set up in 2003 as a Special Purpose Vehicle (SPV) to establish Nigeria’s first full-fledged non-interest bank.
The bank is owned by some 27,000 shareholders including the Islamic Development Bank (IDB). It obtained a regional operating license to operate as a non-interest bank from the Central Bank of Nigeria (CBN) on November 11, 2011 and began full operations as the first non-interest bank in Nigeria on January 6, 2012.
In 2016, it obtained the national banking license from the CBN and started to rapidly spread its network across the country.
Jaiz Bank recorded another milestone on February 9, 2017 as the first non-interest financial institution to be listed on the NSE with the admission of the entire issued share capital of the bank to the main board of the Exchange.