If you have tried to persuade a devout Muslim business owner to take a standard bank loan, you know where the conversation can stall. The issue is not the paperwork or the collateral; it’s the interest.
For many business owners in Nigeria, “Riba” (interest) is a dealbreaker. Even if taking a loan could significantly boost their factory production or help grow your business, they will refuse to accept any loan that has interest attached.
This poses a challenge for Nigeria’s industrial strategy. How can you support the economy when many capable entrepreneurs avoid the financial system due to religious beliefs?
The Bank of Industry (BOI) has found a solution.
Recently, the BOI received final approval from the Central Bank of Nigeria (CBN) to open a Non-Interest Banking (NIB) option.
This is important news.
Previously, the BOI has fueled Nigeria’s industrial growth by offering loans to factories and small businesses. These loans had interest rates, even if subsidised.
Now, with this new license, the BOI can provide financing that aligns with Islamic principles. Instead of lending cash and charging interest, they might buy a machine for you and sell it to you at a higher price (Murabaha), or partner with you and share the profits (Musharakah).
Dr. Olasupo Olusi, the BOI’s Managing Director, emphasised that this is about inclusion.
“With this license, we can reach a new category of borrowers who, until now, were not served,” Olusi said. He is referring to the “faith-sensitive” market, people who have been overlooked despite being active in business. Think about the leather tanners in Kano, the textile merchants in Lagos Island, or the agricultural processors in the Middle Belt who have been running cash-only businesses for years because they avoid bank loans.
The Economics of “Ethical Finance”
This is not only about religion; it is also about liquidity.
Nigeria has one of the largest non-interest finance markets in Africa. The government’s Sukuk bonds are usually oversubscribed, showing a strong demand for asset-backed, ethical investments. By tapping into this market, the BOI is unlocking new funding for Nigeria’s small and medium-sized enterprises (MSMEs). The bank said the new option will help them “finance assets and raw materials”, specifically for these previously excluded groups.
It’s also a smart risk management decision. Non-interest banking often involves asset backing. The bank does not just hand over cash and hope for repayment; they may co-own the asset or project. This ties the bank’s success to the success of the business, which is not always the case with traditional loans.
What’s Next?
The approval is official. The BOI can start operations right away. For small business owners who have been supporting themselves without loans due to their beliefs, this is the chance they have been waiting for. Capital is now available, and it finally fits their needs.
