Potentiality of Islamic Deposit Insurance System in Nigeria: A Lesson from Malaysia

Shamsuddeen Muhammad Ahmad(1*), Salisu Hamisu(2),


(1) Kano State Polytechnic, Kano
(2) Nigeria Deposit Insurance Corporation (NDIC), Garki, Abuja
(*) Corresponding Author

Abstract

The financial crisis highlighted the need for deposit insurance regimes that effectively protect depositors and promote financial stability. Interest in Islamic deposit insurance is rising, incited by the growth of Islamic banking across the globe. The study examines the potentiality of Islamic deposit insurance scheme in Nigeria, considering Malaysian experience. To achieve its objective, this paper used both analytical and qualitative methods after thoroughly examining many relevant works of literature as well as empirical works. The study finds that Islamic deposits are covered separately from conventional deposits, with separate coverage for Islamic window, trust accounts, sole proprietorship, and partnership. It also provides coverage to various contracts, such as mudharabah, wadi`ah, qard and murabahah. Thus, Nigeria can tap the idea in promoting sound financial stability through Sharῑ’ah-compliant deposit insurance scheme. Finally, the paper concludes that to ensure a Shari`ah-compliant deposit insurance system, the government supposed to implement a proper approach, which could be different across jurisdictions, in light of differing Shari`ah interpretations or views from one jurisdiction to another.

Keywords

Islamic Deposit Insurance System; Financial Stability; Nigeria; Malaysia

Full Text:

PDF

References

Angkinand, A. P. (2009). Banking regulation and the output cost of banking crises. Journal of International Financial Markets, Institutions, and Money, 19(2), 240-257.

Arshad, M. K. H. (2011, November). Implementation of an Islamic deposit insurance system for the Islamic financial service industry. In Fourth Islamic Financial Stability Forum Strengthening Financial Safety Nets in the Islamic Financial Services Industry (Vol. 17).

Asli Demirgüç-Kunt, A., & Kane, E. J. (2002). Deposit insurance around the globe: Where does it work? Journal of Economic Perspectives, 16(2), 175-195.

Barth, J., Caprio, G., & Levine, R. (2001). Bank regulation and supervision: a new database. Brookings-Wharton Papers on Financial Services.

Calomiris, C. W., 1996, "Building an Incentive-Compatible Safety Net: Special Problems for Developing Countries." mimeo, Columbia University.

Caprio, G., & Klingebiel, D. (1999). Bank insolvencies: cross-country experience. The World Bank.

Cecchetti, S. G., & Krause, S. (2005). Deposit insurance and external finance. Economic Inquiry, 43(3), 531-541.

Cull, R., Senbet, L. W., & Sorge, M. (2002). The effect of deposit insurance on financial depth: A cross-country analysis. The Quarterly Review of Economics and Finance, 42(4), 673-694.

Demirgüç-Kunt, A., & Detragiache, E. (2002). Does deposit insurance increase banking system stability? An empirical investigation. Journal of monetary economics, 49(7), 1373-1406.

Golembe, C. H. (1960). The deposit insurance legislation of 1933: an examination of its antecedents and its purposes. Political Science Quarterly, 75(2), 181-200.

Hamisu, S. (2014). Islamic Deposit Insurance in Nigeria: Challenges and Prospects. Paper Presented At The 1st International Conference on Islamic Banking and Finance, Bayero University Kano Nigeria, April 17 - 19, 2014.

Hamisu, S., & Hassan, R. (2017). Depositors Protection Scheme: Appraisal of Islamic Banks Participation in Deposit Insurance System. Journal of Islamic Banking and Finance, 5(1), 15-25.

Hoggarth, G., Jackson, P., & Nier, E. (2005). Banking crises and the design of safety nets. Journal of Banking & Finance, 29(1), 143-159.

IADI, (2010). Survey on Islamic Deposit Insurance Results. International Association of Deposit Insurers), 31 March 2010

IADI, (2010).). Deposit Insurance from the Shari`ah Perspective. Discussion Paper. February, 2010. International Association of Deposit Insurers

Ibn Al-Qayyim, M. (1991). ʼIʻlām al-Muwaqiʻīn ʻan Rab al-ʻᾹlamīn, Beirut: Dār al-Kutub al-ʻIlmiyyah

Luk, A. O., Foong and Heung (2018). Banking regulation in Malaysia: overview. Retrieved October, 18, 2018. From:https://uk.practicallaw.thomsonreuters.com/0538?transitionType=Default&contextData

Muslumov, A. (2005). The financial and operating performance of privatized companies in Turkish cement industry.

Najeeb, S. F., Mustafa, M. M., & Casey, P. (2016). Strengthening the financial safety net: the role and mechanisms of Sharīʻah-Compliant Deposit Insurance Schemes (SCDIS).

Ogunleye, G. A. (2002). Deposit insurance scheme in Nigeria: Problems and prospects. NDIC Quarterly, 12(4)

Article Metrics

Abstract : 97 times
PDF : 40 times

Refbacks

  • There are currently no refbacks.


View My Stats