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Finance: How IMF plans to regulate and supervise Islamic banks in Nigeria and other countries

Finance: How IMF plans to regulate and supervise Islamic banks in Nigeria and other countries



How IMF plans to regulate and supervise Islamic banks

IMF directors noted that Islamic banks (IB) undertake distinct operations with risk profiles and balance sheet structures that differ in important respects from conventional banks, with associated financial stability implications.

  • The International Monetary Fund (IMF) Executive Board has endorsed a proposal on the use of the core principles for Islamic Finance Regulation (CPIFR).

  • The CPIFR is intended to provide a set of core principles for the regulation and supervision of the Islamic banking industry

  • Nigeria, South Africa, Kenya, Morocco are among African nations that have put in place legal and regulatory frameworks


The International Monetary Fund (IMF) Executive Board has endorsed a proposal on the use of the core principles for Islamic Finance Regulation (CPIFR), which were developed by the Islamic Financial Services Board (IFSB) with the participation of the Secretariat of the Basel Committee on Banking Supervision.

The directors noted that Islamic banks (IB) undertake distinct operations with risk profiles and balance sheet structures that differ in important respects from conventional banks, with associated financial stability implications.

The IMF called for stronger efforts to strengthen the regulatory and supervisory frameworks to take into consideration the specificities of Islamic Banks to promote financial stability and sound development, particularly in countries where Islamic Banks have become systemically important.

What is Islamic Finance Regulation?

The IMF Staff Paper: “The Core Principles for Islamic Finance Regulations and Assessment Methodology” explained that CPIFR is intended to provide a set of core principles for the regulation and supervision of the Islamic banking industry and are designed to take into consideration the specificities of Islamic banks.

Also READ: These 3 threats can stop Nigeria's economy from growing in 2018, according to the IMF

Why is CPIFR necessary?

An IMF statement said that the CPIFR will complement the international architecture for financial stability while providing incentives for improving the prudential framework for Islamic banking industry across jurisdictions.

The international monetary authority said the CPIFR and their associated methodology will be applied in financial sector assessments undertaken in fully Islamic banking systems and, as a supplement to the Basel Core Principles for Effective Banking Supervision (BCP), in dual banking systems where Islamic banking is systemically significant.

The IMF executive directors welcomed the opportunity to consider the staff’s proposals to strengthen the fund’s engagement on promoting financial stability in countries with Islamic banking.

“They noted that the Islamic finance sector continues to grow and evolve in size and complexity, with Islamic banking offered in more than 60 countries,” IMF statement reads.

The directors endorsed the use of the “Core Principles for Islamic Finance Regulation” (Banking Sector) (CPIFR) and their assessment methodology for the purposes of undertaking financial sector assessments and preparing Reports on the Observance of Standards and Codes (ROSCs) initiated after January 1, 2019, regarding the effectiveness of regulation and supervision of IB.

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Islamic Banks in Nigeria and other African countries

Nigeria, Sudan, South Africa and Senegal, Kenya, Morocco and Niger are among African nations that have put in place legal and regulatory frameworks to enable Islamic banking offerings in their jurisdictions.

In Nigeria, first Islamic banking institution, Jaiz Bank Plc was granted a license to operate as a national bank in 2016 as there are already more than 50 Islamic financial institutions in Africa.

Click here to read the full text by Aderemi Ojekunle

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