Following the successful take off of the non-interest banking in Nigeria, the Nigeria Deposit Insurance Corporation (NDIC) has developed a framework for insuring its deposit liabilities that were not covered under its Deposit Insurance Scheme (DIS).
A non-interest bank is a banking model that offers banking products, engages in trading, investments and commercial services without conventional interest charges. It is rather restricted to a profit and loss sharing formula on its products.
The non-interest banking is currently being undertaken by Ja’iz Bank, Stanbic IBTC Nigeria and Sterling Bank plc.
The public policy objectives of the framework are based on public interest, which seeks to provide corresponding protection to holders of non-interest financial products similar to that of conventional banks.
The objectives include the following depositor protection against loss in the event of failure of any non-interest bank; engender public confidence and enhance resilience of Non-Interest Financial Institutions; encourage competitiveness of Non-Interest Financial Institutions; help to contain the cost of resolving failed non-interest banks and provide an orderly Failure Resolution Mechanism, and promote and contribute to the stability of Nigeria’s financial system.
The emergence of the non-interest banking model in the global financial landscape and its acceptance worldwide as a veritable tool for financial intermediation as well as its proven resilience during the 2007/2008 economic meltdown paved the way for the introduction of non-interest banking in Nigeria
The Maximum Deposit Insurance Coverage (MDIC) for the non-interest banking institutions would be the same as the conventional banks i.e. N500,000 and N200,000 per depositor per account in Deposit Money Banks (DMBs) and Microfinance Banks (MFBs), respectively.
The non-interest deposits that will be covered under the scheme are, safe Keeping Deposit (Wadi’ah); Interest Free Deposit for Investment (Qard); profit Sharing/Loss Bearing Deposit (Mudarabah); profit and Loss Sharing Deposit (Musharakah), and any other deposit type that is Non-Interest Based and approved by the Central Bank of Nigeria (CBN).
According to the NDIC, the following financial products will however not be covered under the scheme: insider deposits – deposits of staff, including directors of non-interest banks or financial institutions; counter-claims from one person who maintains both a deposit account and a non-interest bearing loan account and or a loan based on Murabahah financing where the deposit account serves as a collateral for either or both of the loan accounts and inter-bank takings.
