Hameed Joda: Only Banks Can Provide the Funding Needed for Economic Growth


Business Interview

Taj Bank is the latest bank to intervene in the expansive Nigerian financial landscape. The bank’s core area of operational intervention is the burgeoning non-interest banking sector. Taj Bank’s co-founder, Mr. Hameed Joda, who is the chief operating officer, in a chat with Nosa James-Igbinadolor at its corporate head office in Abuja, believes investment in agriculture is critical to economic growth   

You bank has just been licensed by the Central Bank of Nigeria to begin banking operations, tell us about the process of gaining that licence. Would you say the process was worth it and what does it say about the work of the regulatory authority?

Thank you very much. I would say the process was a long thorough and arduous process. First, we conceived the idea of setting up a non-interest bank around November 2015 and we started working on the project from capital raising because the initial stage was the capital raising exercise, having to put down the seed capital and convince investors to believe in the idea that the non-interest banking model is very much workable in Nigeria. At the end of the day, after two years, we were able to raise the minimum required capital by the Central Bank. We raised more than five billion naira. So, it was indeed a very arduous process, the regulators were very thorough and we had to raise more capital because that was what the regulators wanted. At the end of the day, I’d say it was very much worth it. We have two stand alone non-interest banks in Nigeria which means that the market is growing and the non-interest banking model is gaining acceptance with the Nigerian populace. Furthermore, the institution has been able to create jobs for young Nigerians. One of the major problems in Nigeria today is youth unemployment, so if an institution is able to create jobs for Nigerians then I think it a big achievement. In addition to that, a bank is a catalyst for economic development. We are hoping to finance a number of sectors in the Nigerian economy, especially agriculture. We believe we should focus on agriculture and hence make significant growth impact on the Nigerian economy. It is only an institution like a bank that can provide the funding that is needed for the varied sectors to thrive and that itself is a big win for the Nigerian economy. Indeed, we are very proud to have gone through this process to secure the licence. The regulatory authorities did a good and thorough job. They took their time to ensure that all the critical requirements were met.

What is the intention then of Taj Bank with respect to the banking industry and why is the bank driven towards a niche Islamic financial market rather than conventional banking?

Well, if you look at the non-interest banking model, or the Islamic banking model as it is called in some parts of the world, you would notice that it is the fastest growing segment of the financial services industry. Globally, Islamic finance is growing at 15 per cent and in fact in a country like Malaysia, the total assets size of the industry is about 30 per cent of the entire banking industry. So, the industry is really growing. Coming home to Nigeria, there are a couple of non-interest financial institutions that have set up shop over the last five to seven years and they have recorded remarkable success, including an investment bank and three insurance companies and people are yearning for the model, because people have come to realise that the model is fair, there is certainty when you are being financed, if you are a business, you can plan better. There are no surprises, no cutting of corners as perhaps you may see elsewhere, everything is in the open and there is a general appreciation of the model. More to that, it is also an ethical model, so there are rules governing how you take deposits and what we finance, for instance we cannot finance arms and ammunitions and any other sector that is seen as harmful and the in the world today, there is a growing awareness of ethical finance because it is the way of the future. This is what attracted us to the model and we believe that with the growing awareness here in Nigeria, we are more than confident that we will more than meet the needs and expectations of our customers.

So, what is Taj Bank bringing to the Islamic banking landscape that your competitors haven’t brought or do not have?

Taj Bank is bringing in a lot of things. We are bringing in innovation. Taj Bank is digitally driven, we have invested massively in information technology. These days, there is a thin line between a bank and an information technology company, so for us to really do well and serve our customers in the best way possible, we had to make that investment in information technology. But, more importantly, we believe that there are sectors in Nigeria that financial institutions are not really targeting, maybe they are not keen on those sectors and we see massive opportunities in those sectors, for instance, agriculture. If you look at the GDP of Nigeria, agriculture is the biggest contributor to the GDP of the country. So, we’ve looked at that sector and developed a number of models that we believe will work very well especially in the regions we operate.

So, agriculture is a key focus area, we are confident that with the models we have developed, we will be very successful and impactful. Don’t forget that agriculture is the biggest employer of labour in Nigeria and you can never go wrong if you invest in agriculture, especially if you get the model right. Yes, there are risks and we have looked at those risks and we are confident that we are in a good position to mitigate those risks and at the end of the day make fundamental impacts especially in the area of creating jobs and adding value to the economy of those states where we operate.

So, I know that a couple of days ago, the Directors of the bank opened the bank, how soon should prospective customers, clients and stakeholders of the bank expect Taj Bank to open its doors to the public?

We had a soft launch on Wednesday, 27th November, that’s a pre-launch, but we are opening the bank officially on Monday, 2nd December, 2019. So, our doors will be opened and everyone is invited.

Your doors will be opened on Monday, for those who aren’t Muslims, will your door be opened to them too?

Yes, our doors are open to everyone. We do not discriminate; we are here to serve all and sundry. Though the model of the bank is non-interest, our market reach is to each and every person. We are open to do business with everyone and we welcome everyone irrespective of faith. We do not discriminate on the basis of religion or tribe and even in our employment policies, we are an equal opportunity employer and that is where it starts from. If you look at the composition of the bank today, you will find people from all faiths, all tribes across the country. It therefore means that in our business model, we are open and we welcome each and every person to do business with us.

I know these are early days yet, but in terms of expansion, what is the bank’s expansion plan like? Is the focus of the bank regional or national and why?

We acquired a regional licence to operate in the North-West and North-East regions of the country and our head office is in Abuja and the Central bank gave us approval to open a liaison office in Lagos. Our plan is to raise more capital and apply for a national licence in less than two years of operation. So, in less than two years, we hope to become a national bank and set up in all state capitals, our strategic thrust, is to be among the top ten banks by the year 2025. So we are hoping to make significant investments especially in information technology to achieve this vision within the shortest possible time.

More broadly, what would you say have been the major wins for Islamic finance since its introduction into the Nigerian financial landscape in 2009?

Well, speaking of major wins, our intervention in the market has expanded the number of players in the sector from one stand alone bank to two. We expect more will come.

This shows that the industry is growing significantly. There are insurance and investment banks involved in non-interest finance and we believe that within the next two to five years, non-interest banking will account for as much as 5 per cent of the banking industry in terms of total assets. It is a relatively new sector, less than ten years old but making significant progress in leaps and bounds.