Jaiz Bank Prioritises Customers’ Repayment Capacity Over Interest, Says Manager

Ado-Ekiti branch chief explains interest-free banking, asset-based financing and support for established businesses

By Idowu Adebomi, Ado-Ekiti

The Branch Manager of Jaiz Bank, Ado-Ekiti, Mr Oluwatimilehin Idowu, has explained that the bank’s interest-free banking model prioritises customers’ ability to repay financing and the intended use of funds rather than the interest earnings that typically drive conventional lending.

Idowu, who spoke during an interview in Ado-Ekiti, said the bank operates on an ethical financing system designed to connect customers and businesses with available funds while ensuring that money entrusted to it is channelled towards productive economic activities.

According to him, Jaiz Bank places considerable emphasis on assessing a customer’s repayment capacity and business profile before approving financing, stressing that the approach is intended to promote responsible lending and reduce the risk of defaults.

He said: “Our priority is the person’s ability to repay the money, not the interest we want to make from the customer.”

The branch manager explained that, unlike conventional loans in which customers receive cash directly into their accounts, Jaiz Bank generally adopts a transaction-based approach that links financing to the specific goods or assets a customer intends to purchase.

Using the purchase of a phone as an example, Idowu said a customer seeking financing would identify the item, agree on the price with the seller and present the seller’s invoice to the bank, which would then pay the seller directly.

He explained that the arrangement enables the bank to verify the purpose of the financing and minimise the diversion of funds to activities different from those originally presented by the customer.

Idowu also disclosed that the bank focuses on supporting businesses that are already established, rather than financing individuals seeking to venture into unfamiliar business activities without the requisite experience.

He said the bank prefers entrepreneurs with an established record in their chosen line of business who require financing to expand their operations, adding that the policy reflects its emphasis on responsible financing and the sustainability of customers’ businesses.

The Jaiz Bank manager noted that the institution’s operating model distinguishes it from conventional interest-based banking, offering customers an alternative financial service grounded in Islamic banking principles.

Jaiz Bank operates under a non-interest banking framework, which prohibits the charging and payment of conventional interest, known in Islamic finance as riba. Instead, it uses Sharia-compliant financial arrangements, which may include asset-based sales, leasing and profit-sharing structures, depending on the product and transaction.

The model does not mean that every banking service or transaction is necessarily free of charges. Rather, financing is structured without conventional interest, and applicable prices, fees or profit margins depend on the particular product and agreed terms.

The branch manager’s remarks underscore the importance of public education in helping customers understand the differences between non-interest banking and conventional financial services, particularly in relation to financing, business expansion and the management of funds.

He also emphasised the need for stronger collaboration between financial institutions and the media to improve public awareness of banking products and services, noting that direct conversations alone might not adequately reach prospective customers.

Idowu encouraged greater engagement with journalists and media organisations as a way of communicating the bank’s operating principles, educating the public and attracting customers who may benefit from its services.

He observed that effective media engagement could help bridge the information gap surrounding non-interest banking and enable more individuals and businesses to make informed decisions about their financial needs.

Jaiz Bank is Nigeria’s first non-interest bank, established to provide banking services based on Islamic commercial principles. Its model is designed to offer an alternative to conventional interest-based banking while providing financial services to customers who seek Sharia-compliant options.

The bank’s approach centres on financing permissible economic activities through approved contractual arrangements, with an emphasis on transparency, asset-backed transactions and the sharing of commercial risks and returns where applicable.