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. A Non-Interest Bank is a bank which transacts banking business, engages in trading, investment and commercial activities as well as the provision of financial products and services without the conventional interest charges.
The mandate of the Corporation as enshrined in its enabling Act is to among others, insure deposit liabilities of licensed financial institutions as well as guarantee payment to depositors in the event of failure of an insured institution. The establishment of banks who offer non-interest financial products necessitated the extension of Deposit Insurance coverage to the depositors of such banks in order to provide a level playing field for all deposit taking financial institutions and ensure that holders of Non-Interest Banking products are adequately protected.
It is in the discharge of this mandate that the Corporation developed a framework for issuing deposit liabilities of non-interest deposit taking financial institutions whose deposits hitherto, were not covered under its Deposit Insurance Scheme (DIS).
The public policy objective of the framework is 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:
1. Depositor protection against loss in the event of failure of any Non-Interest Bank;
2. Engender public confidence and enhance resilience of Non-Interest Financial Institutions;
3. Encourage competitiveness of Non-Interest Financial Institutions;
4. Help contain the cost of resolving failed Non-Interest Banks and provide an orderly Failure Resolution Mechanism;
5. Promote and contribute to the stability of the Nigerian Financial System.
As with the existing scheme, 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 for Deposit Money Banks and Microfinance Banks respectively.
The following Non-Interest Deposits would be covered under the scheme:
1. Safe Keeping Deposit (Wadi’ah);
2. Interest Free Deposit for Investment (Qard);
3. Profit Sharing/Loss Bearing Deposit (Mudarabah);
4. Profit and Loss Sharing Deposit (Musharakah);
5. Any other deposit type that is Non-Interest Based and approved by the Central Bank of Nigeria (CBN).
The following financial products will not be covered under the Scheme:
1. Insider Deposits – Deposits of staff including Directors of Non-Interest Banks or Financial Institutions;
2. 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.
3. Inter-Bank Takings
NIGERIA DEPOSIT INSURANCE CORPORATION