Fashola Olayinka Nurudeen

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Alternative to Riba: Case study of Tricent Capital Nigeria.



By
Fashola Olayinka Nurudeen
1100275



July 01, 2012
June August 2012






Alternative to Riba: Case study of Tricent Capital Nigeria.
Fashola Olayinka Nurudeen.
July, 2012.
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1.0 Introduction.
By every standard and qualification riba interest taking is an act that is not only prohibited
in the Quran and the sunnah of the prophet of Islam SAW its also unanimously agreed upon
by all Muslim scholars. Riba in Arabic is increase or increment. With respect to financing it
is defined in Shariah as: any condition or customary increment in debts. Riba was commonly
practiced in Arabia and in other countries in the era of ignorance, its prohibition in Islam
came in a gradual manner, at the beginning Allah discourage its practice in verse 30:39
That which ye give for increase through the property of other people will have no increase
with ALLAH . Then ALLAH condemned Jews for practicing it in verse 4:161 That they
took usury that they were forbidden. Then its prohibition came along with the justification
that it has a bad effect of multiplying many folds in verse 3:130 O Ye who believe devour
not usury doubled and multiplied.

Also in verse 2:275-275: But ALLAH has permitted trade and forbidden usury. Those
who after receiving direction from their Lord desist shall be pardoned for the past. Their
case is for ALLAH to judge. But those who repeat their offence are companions of the fire.
They will abide therein forever. Allah derives usury of all blessings, but will give increase
for deeds of charity and give up what remains of charity if ye are indeed believers, if ye do
not take notice of war from ALLAH and His messenger, but if ye turn back ye shall have
your principal, deal not unjustly and ye shall not be dealt with unjustly.
According to the sunnah of the Prophet SAW, he was reported to have said Avoid the seven
condemning sins, and He mentioned among them taking Riba. Also the Prophet SAW
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said: The wrath of ALLAH is on the taker of Riba, its writer, its giver and two witnesses.
These are just few of the so many sayings of the Prophet as regards the prohibition of Riba in
ISLAM.
2.0 Dangers of Riba
The world economy as we have it today is based on the riba transactions, all the conventional
banks base their transactions on interest which is where they make the huge profit that they
declare year in year out. On all the major streets of the commercial capital of the world from
New York, to London, to Paris and even to Dubai within the Muslim lands the best and
tallest buildings are owned by banks. Nigeria is also not an exception the biggest and best
buildings on Marin Street in Lagos which is the commercial nerve center of the Nigeria
economy is dotted by buildings owned by the major banks in the land.
Riba has dangerous effects and bad consequences on the economy. This is one of the reasons
why Allah forbade it. We will limit ourselves here to two disastrous effects of Riba on the
national economies both in the consumption level and the production one. First, the Riba
loans add to the exploitation of the poor and the needy as it results in more poverty, hence
reducing their future earnings. On the other hand, these Riba loans make the rich creditors
richer and add to their future earnings. It is known that the poor and needy classes constitute
a big majority of the society. And, in case the income of this category of people decreases
then their demand on the consumed and invested commodities decreases as well. So, if we
know that this demand is actually the magic key that turns the wheel of the national
economy, as a whole, we realize how big the extent of the economical problem there will be
and how expensive it is for the individual as well as the society in general.
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Second, in the field of investment and production, the Riba banking system allows the
outflow of currencies to the wealthy people who are able to pay the loans while the poor ones
bear the expenses as the prices of commodities rise up and this result also in national
economy inflation which is disastrous for any economy.
3.0 Micro Finance
Throughout the world, poor people are excluded from formal financial system. Exclusion
ranges from partial exclusion in developed countries to full or nearly full exclusion in Less
Developed Countries (LDCs). Absent access to formal financial services, the poor have
developed a wide variety of informal community based financial arrangement to meet their
financial needs. Microfinance is created to fill this gap
1
. Microfinance pertain to the lending
of small amount of capital to poor entrepreneurs in order to create a mechanism to alleviate
poverty by providing the poor and destitute with resources that are available to the wealthy,
alert at a small scale. According to Anyanwu (2004), microfinance bank is not just providing
capital to the poor, but to also combat poverty at an individual level, it also has a role at
institutional level. It seeks to create institutions that deliver financial services to the poor,
who are continuously ignored by the formal banking sector.


1
Irobi, N.C. (2008), Microfinance and Poverty Alleviation: A case study of Obazu Progressive
Women Association Mbieri, Imo State- Nigeria. Uppsala: Department of Economics
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In Africa and other developing regions, microfinance institutions (MFIs) are regarded as the
main source of funding micro enterprises
2
. Formal credit and savings institutions for the poor
are also available around the globe providing customers who were traditionally neglected by
commercial banks a way to obtain financial services through cooperative and development
finance institution. Suffice it to say that the unwillingness or inability of the formal financial
institutions to provide financial services to the urban and rural poor, coupled with the
unsustainability of government sponsored development financial schemes contributed to the
growth of private sector-led microfinance in Nigeria.

However, in Nigeria the Microfinance sectors is also being operated fully by the major banks
and its core operation is based on Riba transactions, thus the real effect that is expected from
the microfinance sector is not felt by the common man whom the system is originally
designed for. Furthermore, the Muslims are also excluded in this sector owing to the fact that
its base on Riba.
4.0 Islamic Finance in Nigeria
The Nigerian Muslims are in a big dilemma because they are cut between following the
injunctions of ALLAH as regards financial transactions or going off the board to follow the
riab ridden financial transaction that is in place, furthermore, the government is not helping
matters in terms of putting legislations in place to ensure that the financial sector operators
on a riba free environment for those who choose to engage in financial dealings base on their

2
Anyanwu, C.M. (2004), Microfinance Institutions in Nigeria: Policy, Practice and Potential.
Nigeria: Central Bank of Nigeria Research Paper pg 1-31
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religious callings. Recently, in 2011 the Central Bank of Nigeria under the leadership of
Mallam Sanusi Lamido Sanusi instituted a framework of legislation and regulations that will
ensure that Muslims are able to have banks that operates base on the Islamic financial
transactions rules which is free of Riba, the whole country was polarized by the proponent
and supports of the cause which are largely Muslims and the opponents of the cause which
are Christians. The Christians have claimed that its a plot to islamise Nigeria. If that is the
case other countries of the world where Islamic finance have been instituted would as well
become Islamic state but the reverse is the case, in England where you have Islamic Bank of
Britain, in Germany, France, South African to mention a few. The CBN eventually granted
license to 3 banks to operate Islamic banking products to the Nigeria people.

On the 6
th
of January, 2012 Jaiz Bank commenced operations after about 9 years when it first
floated a public offer to raise 2 Billion Naira which was the CBN requirement as at then
shortly before the offer was concluded the CBN under Professor Charles Solude raised the
bar to 25 Billion Naira and this truncated the dream of many Nigeria Muslims waiting to see
and start to patronize a bank that is structured in line with their religious believes.
Now that it seems that Nigeria Muslims have finally seen their dream come true on the 15
th

of June 2012 a Federal High Court in Abuja, the countrys capital declared that there are no
provisions in the CBN Act and the banks provided for in the Banks and other Financial
Institutions Act (BOFIA) that empowers the CBN Governor, Sanusi Lamido Sanusi, to issue
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license for non-interest financial institution to operate under the principles of Islamic
jurisprudence without the approval of the Head of State through the Minister of Finance
3
.
5.0 Tricent Capital Nigeria.
Base on the concerns above and the fact the government and the people of Nigeria are not
ready to embrace Islamic finance or institute legislations that will facilitate the growth of the
sector some Muslims believes that they need not fold their arms and do nothing. Just as its
stated in Quran 13 verse 11: Verily never will Allah change a condition of a people until
they change what is within their souls Base on the aforementioned the company Tricent
Capital saw floated with the aim of implementing an alternative to riba within the Nigeria
financial system particularly at the micro level to help the less privileged Muslims in the
society that would like to ensure that their financial aspect of life is in conjunction with the
dictate of ALLAH and that of His Prophet SAW.

The company was floated in the year 2007 with the mission of Implementing alternatives to
riba and her vision Pleasing ALLAH at all times. The company commenced operation
with a capital contribution of about 300,000 Naira by three main financiers. Over the years
the company embarked on the financing of different business ventures with other Muslims of
like minds, the modus operandi of the company is based on the principles of Islamic Finance,
although there are no legal framework in the country to support Islamic Finance, the
company was duly registered with the government authorities to carry out business activities

3
Available from the Internet: http://tribune.com.ng/sat/index.php/news/7688-islamic-banking-is-illegal-
court.html Accessed: June 30, 2012
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in the country. At the onset the company invested about a sun of 200,000 Naira into a fish
pond and the deal was sealed using the Musharaka concept. Musharakah is a word of Arabic
origin which literally means sharing. In the context of business and trade it means a joint
enterprise in which all the partners share the profit or loss of the joint venture. It is an ideal
alternative for the interest based financing with far reaching effects on both production and
distribution
4
. In the Fish pond Tricent capital hold 60% of the stake and 40% by other
investors. The ventures was structured such that the workers in the farm, that is the farm
manager and the workers also have stake in the business this ensures that there is maximum
commitment from the worker such that every step taking towards ensuring that the ventures
was successful have a direct impact on them as well. A total of above 5 Muslims who
ordinarily would not have been engaged were working in the farm which also goes a long
way to support their families as well. With the capital outlay of about 350,000 Naira at
inception the fish project has made a turnover of about Five Million Naira in 5 years.

Tricent Capital, also involved in financing transactions using the concept of Ijarah. Ijarah is a
contract pertaining to usufruct transfer, with compensation
5
. With this concept Tricent was
able to assist lot of Muslims who could not have afforded the purchase of household
equipments such as Gas cooker, washing machine to mention a few were able to do so with
the help of Tricent. Over the years the company has financed over 50 transactions running

4
Zaharududdin Abd. Rahman (2010): Contracts and the products of Islamic Banking. CERT
Publications, page 181
5
Zaharududdin Abd. Rahman (2010): Contracts and the products of Islamic Banking. CERT Publications,
page 133
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into over 2 Million Naira. The financing was structured in such a way that the client makes a
monthly repayment for the facility granted with a tenor of between 6 12 months depending
on the ability of the client to payback and considering the income of the client. The concept
of Ijarah implemented by Tricent also benefited some Muslim school in the acquisition of
school buses which ordinarily could not have been possible if not for the Ijarah facility
extended to them by Tricent Capital. This singularly activity ensured to build capacity in the
Muslims schools that have enjoyed this facility and it has contributed to the development of
the Muslim community by providing alternative to financing which is devoid of riba.

Also in house construction Tricent Capital has over the years used the concept of Istisnah.
Istisnah is a sale of fully described (specified) constructed or (manufactured) goods
6
. With
the aid of this concept of Islamic Finance, Tricent was able to provide alternative to riba by
assisting Muslims in building their houses as oppose to using the riba based mortgage facility
that is prevalent in the society. Due to the non availability of funds Tricent has been only able
to complete the financing of just one house using the Istisnah concept.

Tricent Capital also used the concept of Salam which is a contract over described commodity
sold as a deferred liability on one party, in exchange for a price that is received during the
contract session
7
. This concept was used by Tricent to finance agricultural production in the
area of Banana plantation. The company provided upfront funds for the production banana on

6
Majallah al-ahkam aladliyah, clause no 124, Dar Ibn Hazam, Beirut, 1st Edition, p. 155
7
Rawdah at-Tolibin, An-Nawawi, Dar Kutub Ilmiah, Beirut, 2/242
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2 hectares of land, the outcome was very successful as it kept many in job and they were able
to meet their financial obligation through and acceptable means that is inconsonance with the
dictate of their religion. With this concept Tricent is going the whole hug to ensure that more
Muslims farmers are empowered and kept in their farming activities thus building capacities
for the Muslims community who base on their religious believes would not want to be
involved in the riba based transactions.
6.0 Conclusion.
In spite of the fact that there are no regulations for Islamic Finance framework in Nigeria,
Tricent Capital has been able to implement an alternative to the riba based industry in
Nigeria at the micro level touching the lives of the people and creating opportunities for the
Muslims thus ensuring that their financial transactions are in line with the dictate of ALLAH
and His Prophet SAW. This has ensured that the Muslims are not left behind in the financial
empowerment and eradication of poverty within the poor section of the society, with more
funds Tricent would be able to touch more lives and contribute to the development of the
society and eradication of poverty with the implementation of Islamic Financial concept
which goes a long away to empower the society as oppose to the riba based transactions
which is prevalent in the society that seeks to exploit the poor masses at the expense of the
few rich ones.