A United Kingdom High Court in London has ordered the former CEO of Intercontinental Bank and pastor of the widely-known Redeemed Christian Church of God (RCCG), Erastus Akingbola, to forfeit nearly seventy-five million British pounds to the bank.

Pastor Akingbola was arrested in 2010 after he returned from the UK, to which he had fled after his financial shenanigans were revealed by the Central Bank of Nigeria and the Economic and Financial Crimes Commission was called in to prosecute such former bank CEOs who were found to have been involved in bank fraud.

According to the UK court judgement obtained by SaharaReporters dated March 24 2011, he will forfeit sums of £8,540,134.58, £68m and £1.3m to Intercontinental Bank. The bank had approached the UK court after it successfully obtained a freezing order against huge sums of monies paid into various shell companies set up by Mr. Akingbola in the Cayman Islands and in which members of his family were beneficiaries.

The fraudulent payments saw Akingbola transferring huge sums of money from Intercontinental bank in 2009. The payments, known as “1st Fuglers Payments”, “Tropics Payments” and “2nd Fuglers Payments”, together the three payment led to the transfer of a total of £80 Million; monies that were used to purchase expensive properties in the UK and beyond.

Mr. Akingbola siphoned most of the funds in dubious transactions between his shell companies in Nigeria within just six weeks through an illegal shares purchase scheme conducted by some of his companies. Forty-one million pounds (£41m) of the money was looted by Mr. Akingbola in one day alone, on 11 May 2009.

Analysts say Mr. Akingbola’s case reflects pervasive greed not only in Nigerian financial institutions, but often in her places of worship, where flamboyant pastors are perennially preaching messages of prosperity. There is also persistent collusion between government and bank officials, one form of which involves governors and ministers transferring key accounts to specific banks with which they have worked out a profitable arrangement. It remains to be seen if RCCG will issue a statement condemning Mr. Akingbola.

Last October, the former Chief Executive Officer of Oceanic Bank, Mrs. Cecilia Ibru, was convicted of bank and securities fraud by the Federal High Court in Lagos, and was stripped of 199 assets and funds worth nearly N200 billion, much of which she had salted away all over the world. On one street alone in the Upper Marlboro area of Maryland, United States, Mrs. Ibru bought at least six palatial homes in 2009, and they were registered either to herself, or to such close relatives as her son, Obaro, her daughter Janet, or her daughter-in-law, Kemi Da silva. Despite the grievous nature of her crimes, however, Mrs. Ibru was sent to jail for only six months. Even that slap on the wrist was “suffered” in the cushy confines of a medical facility that is built like a five-star hotel.

Full text of the judgement:
Case No: 2009 Folio 1680
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 24 March 2011
Before :
MR JUSTICE BURTON
– - – - – - – - – - – - – - – - – - – - –
Between :
INTERCONTINENTAL BANK
Claimant
– and –
ERASTUS BANKOLE OLADIPO AKINGBOLA
and others Defendants
– - – - – - – - – - – - – - – - – - – - –
– - – - – - – - – - – - – - – - – - – - –
Mr Simon Browne-Wilkinson Qc And Mr Adam Zellick (Instructed By Berwin Leighton Paisner) For The Claimant
Ms Elizabeth Jones Qc And Mr John Machell (Instructed By Peters & Peters) For The Defendant
Hearing dates: 3 & 4 March 2011
– - – - – - – - – - – - – - – - – - – - –
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
………………………..
MR JUSTICE BURTON
Mr Justice Burton :
1. The First Defendant (“the Defendant”) was the Managing Director of the Claimant Nigerian Bank (“the Bank”) until 14 August 2009, when he was dismissed. The Claimant makes a number of claims against him in very substantial sums. This application for summary judgment, pursuant to CPR Part 24, has related only to three aspects of those claims, although the background has, to an extent, been relevant.

Although there have been 15 files before me, including evidence gathered during the various applications relating to the freezing order against the Defendant, which still continues in place, with the considerable assistance of both leading Counsel the evidence which required detailed consideration for the purposes of this application was reduced into a relatively small compass.
2. The three claims or categories of claims to which I refer above are as follows:
i) The “first Fuglers payment”. This was a payment made out of the Bank to
Fuglers, a firm of London solicitors, at the instance of the Defendant, in the sum of £8,540,134.58 on 11 March 2009 to purchase property in London in the names of the Second to Fourth Defendants, which, it is common ground,
are companies owned by the Lifeboat Settlement, a Cayman Islands Trust, established by the First Defendant for himself and his family as beneficiaries.

ii) The “Tropics Payments”. This relates to a number of payments paid at the instance of the Defendant and/or with his knowledge by the Bank, totalling in all some £68m or 18.6bn naira (N18.6bn), to, or for the benefit of, four interrelated companies (Tropics Security Ltd, Tropics Finance and Investment Ltd, Tropics Properties Ltd and Bankinson Nigeria Ltd, collectively “the Tropics companies”), of which the Defendant was a director and shareholder, between 11 May and 26 June 2009.

iii) The “second Fuglers payment”. This was a further payment out at the instance of the Defendant to Fuglers in the sum of £1.3m on 13 July 2009, again to purchase property in London, in the name of the Fifth and Sixth Defendants, which are admittedly companies owned by the Octopus Trust, an Isle of Man trust established by the Defendant for himself and his family as beneficiaries.

3. There is no issue that the Defendant owed duties to the Claimant during his employment and directorship of the wide ranging nature set out in paragraph 4 of the Amended Particulars of Claim, and admitted in paragraph 10 of the Defence and Counterclaim, by reference to ss279 to 283 of the Companies and Allied Matters Act C20 Laws of the Federation of Nigeria 2004 (“CAMA”) (supplemented, on the Claimant’s case, by obligations owed by the Defendant under the Banks and Other Financial Institutions Act 1991 (Nigeria) (“BOFIA”)). These constitute, as has really been common ground between the parties, statutory codification of the common law duties of a director, as established and explained in a number of well-known English
authorities. The experts on each side, who have at this stage put in short reports commenting on the relevant issues, Mrs Ayoola Modupe Ogunsola Obe for the Defendant, and Dr Tunde Ogowewo for the Claimant, agree that, particularly given the relative paucity of decisions in the area of company law in Nigeria, English authorities are heavily relied upon and highly persuasive in the Nigerian courts.

4. With regard to the first Fuglers payment, it was apparent to me from the evidence that the Defendant’s case, set out in his evidence, was that the money drawn from the Bank and used to purchase the London property was loaned to him by a company called Regal Investments Co Ltd (“Regal”) (of which the Chairman of the Bank, a Dr Obieri was the principal), which was itself loaned to Regal by Intercontinental Capital and Markets Ltd (“ICML”), a subsidiary of the Bank, and that he recognised that he was indebted to Regal in the sum advanced in any event. It seemed to me that the disputed issue as to liability to repay the first Fuglers payment could be resolved if, even on his own case, he was willing to repay Regal, and, in the event, through Regal, the Bank’s subsidiary. In the event, Ms Jones QC, for the Defendant, was able to obtain from Nigeria his instructions to give an undertaking to use his best endeavours (by way of instruction/expression of wishes to the relevant trustees) to secure payment via Regal to ICML, and, if that sum is paid, then it is likely to satisfy the substance of the Claimant’s claim in this regard without resolving the disputed issues of breach of duty: and by agreement this aspect of the summary judgment application has been stood over in the hope that it can be so resolved.

5. As for the Tropics payments, the Claimant’s primary case is that there is no explanation whatever for the siphoning out from the Bank, at the instance of the Defendant, of £68m to his companies over the period of six weeks. The Defendant has given an explanation, namely that the sums were owed to the Tropics companies (or at any rate to one of them, Tropics Securities, which authorised or requested payment to its associated companies) in respect of outstanding sums due in relation to acquisitions of shares in the Claimant. Tropics Securities were stockbrokers, one of three stockbrokers used by the Claimant at the material time, the others being an in-house subsidiary, Intercontinental Securities Ltd (“ISL”), and a third company, Summit Finance Ltd (“Summit”), of which Dr Obieri was President. The case pleaded in the Defence and Counterclaim is as follows:

“37. From about April or May 2007 and at all material times thereafter, the Bank engaged three stockbroking firms, namely Tropics Securities …, Summit … and … ISL … in respect of various stockbroking transactions, including the purchase of shares. All (alternatively, a substantial part) of the Share Transactions were for shares in the Bank itself.
…
41. In settlement of debts owing to Tropics Securities arising from its execution of Share Transactions from time to time, and in response to written request for payment, the Bank made a number of payments to and/or at the direction of Tropics Securities. These payments each related to the purchase of shares which were made on the Bank’s mandate.”

6. This explanation, given by the Defendant, is supported by Mr Bayo Dada, the General Manager of Tropics Securities at the time, and still a non-executive director of the Claimant bank, and by Mr Akin Fabunmi, who was, at the material time, Financial Controller of the Claimant bank. The Claimant does not accept that there is any truth in such explanation, and a Mr Jimoh, Head of the Inspection Group of the Claimant, has given evidence that, although he has been able to reconcile acquisitions of shares in the Bank in an amount of approximately N160.7bn (now the subject matter of a separate claim against the Defendant, not the subject of this summary judgment application, relating to an alleged “illegal share support scheme”), he cannot track any record of the alleged further sum of N18. 6 billion, the subject of the Tropics payments.

This first way of putting forward the Claimant’s case on the summary judgment application, namely that there is simply no explanation or justification for the removal of the N18.6 billion, was described by Mr Browne-Wilkinson QC, in his submissions, as Alternative A or, once it became apparent that there were to be three such, then rechristened as Option A. He submitted that his summary judgment application must succeed either on that basis or, even if the explanations put forward were considered to be sufficiently arguable for Part 24 purposes, then on the basis of Option B or Option C:

7. Option B. If the payments were made to, or to the order of, Tropics Securities by way of payment for the acquisition of the Claimant’s own shares, then that was unlawful, and hence a breach of the Defendant’s duty, by reference to s160 of CAMA, which (subject to immaterial exceptions), provides, in subsection (1), that “a company may not purchase or otherwise acquire shares issued by it”.

8. Option C. The explanation is now put forward, which Mr Browne-Wilkinson categorises as a recent change of case by the Defendant, in his second witness statement, recently served on 24 January 2011, that the payment was made in respect of shares acquired by customers of the Bank (including directors) with monies loaned to those customers by the Bank. That too he submits would have been unlawful, and amounted to a breach of duty by the Defendant, by reference to s159 of CAMA, headed “Prohibition of Financial Assistance by Company for Acquisition of its Shares” whereby:

“(1). In this section, financial assistance includes a gift, guarantee, security or indemnity, loan, any form of credit and any financial assistance given by a company, the net assets of which are thereby reduced to a material extent or which has no assets;

(2). Subject to the provisions of this section – (a) where a person is acquiring or is proposing to acquire shares in a company, it shall not be lawful for the company of any of its subsidiaries to give financial assistance directly or indirectly for the purpose of that acquisition before or at the same time as the acquisition takes place; and (b) where a person has acquired shares in a company and any liability has been incurred (by that or any other person), for the purpose of this acquisition, it shall not be lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of reducing or discharging the liability so incurred.

(3) Nothing in subsection (1) of this section shall be taken
to prohibit (a) the lending of money by the company in the ordinary course of its business [where] the lending of money is part of the ordinary business of a company.”

This then is Option C and completes the set of premises upon which Mr Browne-Wilkinson submits that, in any event, the Claimant must be entitled to summary judgment on the basis that the Defendant has no arguable defence in respect of the Tropics payments.

9. In the event, Option B, if ever pursued by the Defendant, was not pursued, and Ms Jones made clear that, not only the Tropics payments, but also the entirety of the N160bn, the subject of the alleged “illegal share support scheme”, referred to in paragraph 37 of the Defence and Counterclaim (set out in paragraph 5 above), did not constitute or relate to the purchase by the Claimant of its own shares, but in every case related to alleged acquisition of those shares with the Claimant’s money, but for its customers.

Hence:
i) In order to succeed, and obtain summary judgment, in respect of Option A, the Claimant must show, albeit that the obligation on the Defendant is to raise a defence, that such defence has no real prospect of success. In this case, that involves inviting the Court to reject the evidence of the Defendant, of Mr Dada and of Mr Fabunmi, to which reference will be made, and to a limited extent the evidence of the Defendant’s wife, Mrs Akingbola, also a director of the Tropics companies, who gave hearsay evidence as to what she was told at the time by Mr Dada, as unreliable or incredible. Both Counsel referred me to the White Book at paragraph 24.2.5, which warns a court to be “wary of trying issues of fact on evidence where the facts are apparently credible and are to be set against the facts being advanced by the other side … unless there is some inherent improbability in what is being asserted or some extraneous evidence which would contradict it.” If the Part 24 application succeeded, there would be judgment for the full amount of the £68m (N18.6bn).

ii) As for Option C, this would depend upon Mr Browne-Wilkinson’s establishing that there is no doubt that, if this was the explanation of the payment, it was plainly unlawful, as being financial assistance in respect of the Claimant’s own shares in breach of s159 of CAMA. If the Part 24 application succeeded on this basis, then there would need to be an enquiry as to the equitable compensation payable by the Defendant in respect of his breach of duty, because it might be that there would fall to be set off, against the £68m, some value to the Claimant.

10. With regard to the second Fuglers payment, the Defendant’s case is that the sum advanced by the Claimant was reimbursed/repaid by a payment from Tropics. Mr Browne-Wilkinson made clear in his skeleton argument that he does not proceed with an application for summary judgment in this regard if the Claimant is successful in respect of all the Tropics payments, including that pleaded in paragraph 6(9) of the Amended Particulars of Claim, which the Claimant asserts to be the source of the monies said to have been reimbursed. If, however, he is not successful by way of summary judgment in respect of the Tropics payments, then he seeks to argue (i) by
reference to the decision in the House of Lords in Guinness plc v Saunders [1990] 2 AC 663 (“Mr Ward’s case”) that, even if a sum was repaid/replaced by the Defendant, he is not entitled to credit/set-off in that regard in respect of his breach of duty (ii) that even if he were so entitled, there was no repayment, since the money used was, in fact, the Bank’s money emanating from the Tropics payments.

11. Finally, insofar as necessary, the Defendant relies, in respect of any breach of duty found, upon the statutory relief from liability made available to a director in certain cases by s558 of CAMA, equivalent to s727 of the English Companies Act 1985 (now s1157 of the Companies Act 2006).

The Tropics Payments Option C

12. I turn to deal first with the Tropics payments and Option C, namely, whether, if the explanation is that the Claimant’s monies were paid away to the Tropics companies in May and June 2009 in order to pay Tropics Securities as stockbrokers for the acquisition of shares in the Bank for which the Bank was loaning/had loaned monies to its customers, that would be a lawful explanation, or one which itself would constitute a breach of duty by the Defendant.

13. I have cited in paragraph 8 above the relevant section of CAMA. I have also referred to the views of Dr Ogowewo, that (i) English decisions which are not part of Nigerian law and are therefore not binding on Nigerian courts are nevertheless of highly persuasive value (paragraph 10 of his Report) (ii) “the paucity of Nigerian case law has meant that Nigerian courts attach substantial weight to decisions of the English courts on company law matters i.e. on post-1900 English decisions” (paragraph 12)
(iii) “the former Federal Supreme Court of Nigeria’s decision …supports resort to persuasive foreign authority in the interpretation and application of a term contained in a Nigerian statute where a similar term in another jurisdiction has already received judicial interpretation or been used in an authoritative statement of the rules of the common law” (paragraph 13) (iv) “it is very likely that Nigerian courts will
place considerable weight on English decisions on the … equivalent provisions under English company law statutes of sections 159 [and] 160 … of CAMA, particularly since (a) these are subjects on which the English courts had extensive case law and Nigerian courts have a dearth and (b) … CAMA does not on these subjects diverge from the broad principles of English law” (also paragraph 13). Mrs Obe does not substantially differ (paragraph 49 of her Report). There are two relevant authorities
which have been cited to me on the meaning and effect of equivalent statutes, Steen v Law [1964] AC 287, a decision of the Privy Council, on appeal from the Supreme Court of New South Wales, relating to the provisions of the equivalent New South Wales Companies Act, and Fowlie v Slater, a short report in 1979 NLJ 465, relating to the then English statute, s54 of the Companies Act 1948. The wording of these
statutory provisions was materially the same as CAMA s159, with the addition of some words, which I shall underline, namely “for the purpose of or in connection with a purchase … of any shares in the company.” This difference may arguably reduce the ambit of the Nigerian statute, as compared with the Australian and English statutes.
14. In Steen v Law, a company, I.V.M., not engaged in the business of lending money, but in the business of selling automatic vending machines, lent money to another company, A.M.H., so that A.M.H. could then acquire all the shares in I.V.M., so as to turn it into a wholly owned subsidiary (with favourable impact on a liability to undistributed profits tax). It seems obvious that (i) the lending of money was not part of the ordinary business of I.V.M., and (ii) the lending of money by I.V.M. to A.M.H.
was not in the ordinary course of I.V.M.’s business, but a one-off transaction involving all its shares. Viscount Radcliffe, giving the opinion of the Privy Council, however, did not restrict his decision to that conclusion, because he said (at 300) that “there seems to have been very little judicial exposition of the meaning of proviso (a) since it was first introduced into company legislation, and in deference to the cogent
arguments that were advanced to their Lordships on this issue they will deal with the interpretation of the proviso in more general terms.” At 301, he said:

“This proviso, then, must be read not as exempting particular loan transactions made for identifiable purposes but as protecting a company engaged in moneylending as part of its ordinary business from an infraction of the law, even though moneys borrowed from it are used and, perhaps, used to its knowledge, in the purchase of its own shares. Even so, the qualification is imposed that, to escape liability, the loan transaction must be made in the ordinary course of its business.

Nothing, therefore, is protected except what is consistent with the normal course of its business and is lending of a kind which the company ordinarily practises.”

15. He continued: “In their Lordships’ opinion such an approach to the interpretation of proviso (a) necessarily requires that the “lending of money”, to be part of the ordinary business of a company, must be what may be called a lending of money in general, in the sense, of a registered moneylender or a bank. Such lenders are not obliged to accept their borrowers; but it is characteristic of their business that, if they do lend, the money made available is at the borrower’s free disposition and is not, except in special circumstances, confined to special uses or restricted to particular and defined purposes. Unless the lending of money as part of the ordinary business of a company is understood in this sense, the absurd result would be reached that any lending operations of which it made a practice, however restricted their purpose or remote from general moneylending, would qualify the company to ignore the prohibition of the section and finance purchases of its shares, provided that it could describe such advances as made in the ordinary course of its business.”

16. He concluded: “… a company which, for instance, lent money from time to time to trade suppliers or purchases could claim that the lending of money was part of its ordinary business and that it was accordingly one of the companies intended to be protected by proviso (a), if it chose to make loans in connection with the purchase of its shares. Yet it is not possible to suppose that the section could have been intended to provide any exemption or relief for such cases, for there could be no good reason for allowing a company to use previous lendings for quite different purposes as the justification for share purchase loans, which the legislation is in general intended to forbid.

This interpretation is supported by the fact that in the proviso the “ordinary business of the company” is associated with “lending … of money in the ordinary course of its business.”

The latter words are not intended, their Lordships think, to be synonymous with the “ordinary course of business” itself and seem to refer more particularly to advances of a scale and for a purpose similar to those regularly made by the company in carrying out its business. Such a construction accords naturally with the idea of general moneylending, provided that the advances do not amount to a departure from the usual order of business: but it is, on the other hand, virtually impossible to see how loans, big or small, deliberately made by a company for the direct purpose of financing a purchase of its shares could ever be described as made in the ordinary course of its business.”

17. There are thus drawn out particular questions, such as whether the monies loaned are “at the borrower’s free disposition” – although it does seem to me that that is simply part and parcel of the question whether the monies were advanced for the alleged unlawful purpose. It is also clear in that case that the loan was for the benefit of the lender (and for the purposes of the lender i.e. to have its own shares bought) and not the borrower.

18. In Fowlie v Slater the Queen’s Bench Divisional Court held, in relation to a loan by Slater Walker Ltd to a company for the purpose of assisting that company to purchase shares in Slater Walker Securities Ltd, of which Slater Walker was a subsidiary, that: “Although the lending of money was no doubt part of the ordinary business of the company, the lending was not “in the ordinary course of business”. The loan was not at the free disposition of the borrower, but was specifically and solely for the purchase of shares in the lender’s holding company.
Further the loan was not for the benefit of the borrower.” and Steen v Law was thus applied.

19. Mr Browne-Wilkinson submits that it is clear from the conclusions of Lord Radcliffe, in a decision which was plainly meant to be authoritative, that “it is … virtually impossible to see how loans, big or small, deliberately made by a company for the direct purpose of financing a purchase of its shares could ever be described as made in the ordinary course of business.” If, as now explained in relation to the Tropics
payments (and also as asserted in relation to the N160bn not the subject of this summary judgment application referred to in paragraph 6 above), the monies were caused to be advanced by the Bank to reimburse the stockbrokers for the purchase of the Bank’s shares then (i) if it was pursuant to a prior agreement by the Bank for a loan to a customer for that purpose and/or (ii) in any event in that it was an advance for that purpose i.e. to pay for such shares, then in either case it was financial assistance for the purpose of the acquisition of shares in the Bank, which would fall expressly within Viscount Radcliffe’s condemnation.

20. Ms Jones made two cases, one factual and one legal. As for the factual submission, she pointed to documents exhibited to a recent third witness statement of Mr Tickner, the Defendant’s solicitor, which were passed to the Defendant by Mr Fabunmi, he having obtained them from an internal source at the Bank. These documents relate to four customers whom Mr Jimoh had already referred to as appearing in the Bank’s records as customers in whose names, as he explained, shares acquired by the Bank were put, as part of the alleged illegal share support scheme. In relation to at least three of these customers, such documents included reference to applications for a loan to enable the purchase of the shares of “blue-chip companies in the secondary market” (although one of them specifically applied for a “share loan to enable us [to] purchase Intercontinental Bank shares from the secondary market”). If, she submits, there was at least in some cases not a specific loan for the purpose of the purchase of the Bank’s own shares, but simply a request for a loan to enable the purchase of shares which might include the Bank’s shares, then that would not offend against s159(2). The Claimant’s case would be that such documentation was part of the ‘cover-up’, of which the Defendant and others are accused, and, in any event, the transactions would be covered by the statutory words “directly or indirectly”.

21. As for Ms Jones’ legal submission, she submits that Viscount Radcliffe’s dictum, upon which Mr Browne-Wilkinson lays such emphasis, cannot be taken at face value, if it would thus be used to found an argument that there can never be a loan or advance by a company for the purpose of acquisition of its own shares in the ordinary course of business. She submits that, if that is so, then it renders wholly nugatory and ineffective the proviso in subparagraph 3(a). It is only if there is financial assistance (directly or indirectly) for the purpose of the acquisition of the company’s own shares (hence falling foul of subsection 2(a)) that the proviso can come into play. She submits that, in this case, the proviso does arise, because (i) (unlike the company in Steen v Law) for the Bank, the lending of money was part of its ordinary business (ii)
(unlike the one-off transaction in relation to all the Company’s shares in Steen v Law) such lending of money by the Bank was (or was arguably) in the ordinary course of its business.

22. I am of course assessing the issue of Nigerian law, which is to be regarded as a question of fact by this Court, although there is, in this case, the important factor that both experts conclude that English law, and hence the view of an English judge, is highly influential in the resolution of the issue, and it is difficult to see, on the facts of this case, that the slight difference between the wording of the Nigerian and English
and Australian statutes is likely to be determinative. However, even Viscount Radcliffe’s words leave open the possibility of the operation of the proviso, and Ms Jones’ submissions are very persuasive. It seems to me that this is not an issue which can be resolved without reference to the facts themselves. The Defendant asserts that, under his managership, and no doubt, he would assert, with the agreement and involvement of others, the Bank was operating in the ordinary course of its business in providing facilities to its customers (including his fellow directors) to purchase shares including, or perhaps even exclusively, shares in the Bank. The Claimant however would point to this case that this cannot have been in the ordinary course of its business, by reference to the very methods, including cover-up and non-disclosure, which were used to achieve an exercise which, if it be that these Tropics payments of £68m (N18.6bn) fall to be added to the balance of the N160bn, referred to in paragraph 6 above, in fact meant that 27% of the equity of the Defendant Bank consisted of shares either purchased by the Bank or with the Bank’s monies. This of
itself could not, the Bank would submit, be regarded as in the ordinary course of its business.

23. It can be seen however, that I am not persuaded by Mr Browne-Wilkinson that this is an issue of law which can be resolved on this application, and that, if it is arguable that the Tropics payments of £68m were indeed payments by way of advances to customers in respect of the acquisition of shares in the company, that might amount to advances made in the ordinary course of the Bank’s business of lending. Option A

24. The issue is whether there is an arguable case that the £68m was not simply misappropriated by the Defendant by causing its transfer to his companies, but was paid to reimburse those companies in respect of obligations owed by the Claimant to Tropics Securities as stockbrokers for the cost of acquisition of the Defendant’s shares, arguably not in breach of the provisions of s159 of CAMA. The evidence that supports the Defendant’s case is, on the evidence before me, very slender, and depends entirely on the oral assertions of the Defendant and of Mr Dada and Mr Fabunmi, both of whom the Claimant alleges to be and have been in concert with the Defendant.

The Evidence
25. The starting point is the second affidavit of Mr Opasanya, the Claimant’s Nigerian lawyer. At paragraphs 15 to 16, he refers to two accounts involved in the Tropics Payments, the Prepayment account and the Time Deposit account, neither of which is an account designated for use in transactions with individual customers or third parties, and to the Claimant’s case that key senior individuals (including Mr Fabunmi
and a Mr Adebiyi, the Bank’s former Executive Director), known to be close to the Defendant were involved in the manipulation of those accounts, and the transfer of the Tropics Payments.

26. He then describes, in paragraphs 18 to 21, how the first Tropics payment of N10bn consisted of three manager’s cheques (bank drafts), drawn on the Prepayment account in favour of Tropics Securities, Tropics Properties and Bankinson in the aggregate amount of N10bn, issued on 11 May 2009, following a letter from Tropics Securities dated 8 May 2009, marked for the attention of Mr Adebiyi (and copied to Mr Fabunmi), simply stating “as discussed, kindly issue the cheque for share payments in the following names”, identifying the three companies and the sums making up the N10bn.

There were no enclosures in the letter nor any explanation of which precise “share payments” or transactions the request for a cheque related. On 11 May 2009 Mr Fabunmi instructed that the managers’ cheques be issued and be debited to the

Prepayment account.
27. Mr Opasanya continued: “25. When the issuance of these cheques was [subsequently] investigated by the Bank’s Inspection Department, Mr Fabunmi
claimed to have sought and obtained the authorisation of his direct supervisor, Mr Adebiyi for the issue of the cheques and that he himself was not fully in the picture. Mr Fabunmi claimed that he was informed by Mr Adebiyi that the cheques represented payment in respect of the Bank’s shares purchased by Tropics Securities on behalf of the Bank.

26. The Bank in its investigations has been unable to find any evidence to support the claim that the cheques were issued as payment for the purchase by the Bank of the Bank’s own shares.

28. Mr Opanasya stated (in paragraph 27) that manipulating the Time Deposit account and the Prepayment account in order to issue the three managers’ cheques (whether to pay for shares purchased on behalf of the Bank or otherwise) was highly irregular, and that such purchase ought to have been recorded in the Bank’s books by way of a debt to a specific investment account. Other than the letter from Tropics Securities there was no other documentation to support this purported purchase of shares. He said:

“It is remarkable that the Bank should have made a payment of such magnitude without at the very least being provided with a schedule of the shares purchased, the number of units purchased and the price at which they were purchased or, alternatively, contract notes in respect of the shares
purchased.”

29. In paragraph 28, he contrasted the brief letter from Tropics Securities of 8 May 2009, leading to the payment of N10bn, with the letters from Summit, setting out in great detail the shares purchased, the number of units purchased, the price at which the shares were purchased and the total price payable by the Bank for the shares: unlike the ‘share support scheme’, where it appeared that the Bank’s funds had been used for the acquisition of the Bank’s own shares, as regards the N10bn payment, the Bank had been unable to find any evidence that its proceeds were used to acquire any of the Bank’s own shares.

30. Mr Opasanya then deals with the balance of the Tropics payments, identifying in relation to the N3.35bn (£14,274,556) payment on 18 May 2009 that it was pursuant to a similar letter dated 15 May 2009 with materially the same wording as the earlier letter, again not specifying what shares were allegedly purchased on behalf of the Bank. In relation to each of the Tropics payments, Mr Opasanya confirms that “there is no evidence that the payments were in fact used to purchase any shares on behalf of the Bank” (paragraphs 34, 34.6, 34.15, 34.19, 34.28, 34.32, 34.36 and 34.40).
31. The Defendant’s account is given in his first witness statement of 1 April 2010, confirming (at paragraph 109) that: “to the best of my knowledge and belief, the [Tropics] payments … were reimbursements in respect of the purchase of shares made pursuant to the Bank’s mandate.”

32. At paragraph 113 he stated that he was aware that the Bank had been purchasing shares since April or May 2007, and that Tropics Securities (along with ISL and Summit) were brokers frequently used by the Bank for that purpose, and at paragraph 117 that in about late January 2009 Mr Dada informed him that the Bank had not paid Tropics Securities the sum of N16bn “in respect of the purchase of shares on its mandate”. He acknowledged (in paragraph 119): “that the amount of credit which Tropics Securities afforded the Bank in the course of these share purchases came to be exceptionally high. At the same time I had in mind the fact that there was a longstanding business relationship between Tropics Securities and the Bank and there was a high degree of trust between those responsible for managing their mutual business … I had no doubt that the Bank would meet its obligations (when agreed) and it never occurred to me that anyone at the Bank would seek to dispute Tropics Securities’ entitlement to be paid what was owed to it.”

33. He said, in paragraphs 121 to 122, that he accepted that for such a situation to have arisen there must have been a lack of proper control at Tropics Securities and within the Bank.

However: “I had no reason to monitor what Mr Dada was doing. I was extremely busy carrying out my responsibilities for the Bank … Tropics Securities knew its customer well and therefore had every confidence that the Bank would meet its obligations. … In other circumstances it is fair to say that I might well have ‘hit the roof’ if told this. For example, in no circumstances would it have been acceptable for another Tropics Securities customer to be afforded such extraordinary latitude.”

34. He said, in paragraph 124, that he spoke with Mr Adebiyi “as the individual responsible for the Bank’s share purchase mandate. Even though I was comfortable that the Bank would pay its debt provided it was satisfied that the amounts outstanding were due, the size of the debt was, on any view, substantial … my immediate concern was that it could potentially cause a loss of confidence in the Bank if it were to be perceived that the Bank was facing liquidity issues. I therefore told Mr Dada to speak to Mr Adebiyi in order to persuade the Bank to agree to pay the amounts outstanding as soon as possible.” He added, in paragraph 125, that he was not involved in arranging the later Tropics payments, although Mr Dada did tell him that the Bank was paying off its debt.

35. It is in paragraph 110 of his second witness statement that the Defendant makes the statement which (as set out in paragraph 8 above) Mr Browne-Wilkinson describes as his change of case from that set out in paragraph 37 of the Defence and Counterclaim (in paragraph 5 above) and in paragraph 109 of his first witness statement, set out in paragraph 31 above: “The Bank’s case in relation to the purchase of shares in the Bank is based on a fundamental misunderstanding. There was never any scheme under which the Bank purchased its own shares for its own benefit, and, as far as I am aware, the Bank never purchased its own shares for its own benefit.”

36. Mr Dada’s evidence, in his first witness statement, was (in paragraph 57) that, Mr Fabunmi, upon his arrival as the new Financial Controller in about November 2008, wanted to know what level of stock the Claimant had purchased and what, if any, outstanding obligations the Claimant had in respect of payments for these purchases, and conducted a detailed exercise by liaising with the three nominated stockbrokers.

He recalls Mr Fabunmi saying at the time that within the Bank it would be very difficult for him to carry out his own reconciliation of all share purchases for the previous year as he had not personally been involved.
37. He said (in paragraphs 59 to 61) that he was not concerned about the extent of the backlog, but “needed the Bank to pay us for the shares that it mandated us to acquire”. In paragraph 67, he says that Mr Adebiyi agreed in early May 2009 that he would authorise a substantial payment, and asked him to send the Bank a letter from Tropics Securities requesting payment of N10bn in the first instance. His letter did not give details of the shares purchased on behalf of the Claimant because “I had already sent this information to the Bank with my earlier payment demands and these demands had been discussed and agreed with Mr Adebiyi.” As for his letter of 15 May 2009, he states, in paragraph 76, that he was “simply asking the Bank to reimburse Tropics Securities for those share purchases by paying the amounts owing direct into the loan accounts of the Bank’s subsidiaries which had been used in order to finance the purchase of the shares in the first place.”

38. Mrs Akingbola, the Defendant’s wife, gave a confirmatory statement, but was unable to add a great deal. She said, at paragraph 26, that Mr Dada told her about the existence of the substantial backlog in payments by the Bank for the acquisition of shares by Tropics Securities, and that she “was concerned by this and … asked him to check what was owed to Tropics Securities and in respect of what transactions so that this could be taken up with the Bank”.

39. She concluded, at paragraph 32, that the payments by the Claimant to the various Tropics companies “are all consistent with my recollection and understanding that they were repayments of borrowings by Tropics Group companies in respect of the purchase of shares.”

40. Mr Fabunmi stated, at paragraphs 17 to 20 of his first witness statement, that when he became Financial Controller in November 2008 he conducted an analysis of the Bank’s trading and other accounts and ascertained that at that time from the Bank’s general ledger it had expended approximately N161bn on the purchase of shares in the Bank itself between April 2007 and November/December 2008: N161bn was a very significant sum to have expended on shares and therefore he was keen to obtain a better understanding of the full extent of the Claimant’s commitments and liabilities in this area, and establish whether the N161bn represented the total value expended on shares, or whether there were still sums which had yet to be paid or processed.

41. At paragraph 24, he stated that he then turned to consider whether there were any outstanding payments due from the Bank to Summit, ISL and Tropics Securities. Mr Adebiyi asked each of Summit, ISL and Tropics Securities to check their records with a view to confirming how many shares had been acquired and details of any outstanding payments.

42. Mr Fabunmi, in paragraphs 25 and 26, describes how he had little involvement with Summit, but there were said to be outstanding payments due to Summit of about N400m (£1.5m). In the case of Tropics Securities, he describes in paragraphs 27ff how he was told by Mr Adebiyi in early May 2009 that very significant amounts were owing to them in respect of transactions which went back as far as July or August 2008, and that he had reviewed the various payment demands by Tropics Securities and was satisfied that the amounts claimed were due. Mr Adebiyi explained to him that they related to the purchase of shares in the Bank which he had mandated and that Tropics Securities would be writing to him in due course to re-request payment. Mr Fabunmi was “happy to proceed on the basis of his verbal confirmation, but on each occasion when I was asked to process the payment demands, I spoke with him to confirm that the specific payment amounts should be processed”.

43. He states, in paragraph 30, that when he received the 8 May 2009 payment request, he immediately spoke to Mr Adebiyi, due to the large sum of money involved. Mr Adebiyi explained to him that back in 2008 the Claimant had agreed to finance the purchase of a substantial number of unregistered shares on behalf of investors and customers of the Claimant, using Tropics Securities as one of its brokers, and the amount now owing to Tropics Securities was in the region of N16bn, and in addition, substantial interest had accrued: and that due to liquidity issues payment to Tropics
Securities would need to be made in stages.

44. Mr Fabunmi concluded: “31. … I had worked with Mr Adebiyi for over five years and trusted his integrity and judgment completely. I had no reason to question or doubt what he was telling me in relation to these outstanding payments … Nevertheless I did independently call Mr Dada to check that Tropics Securities had the shares in question before each payment request was met.

36. … Mr Dada was, and still is, a non-executive director of the Bank. I would have no reason to doubt either his confirmation or that given by the CFO Mr Adebiyi. It was not my responsibility to audit the decisions taken by Mr Adebiyi to acquire the shares or to question his confirmation that payment was now due.”

45. It is clear that Mr Fabunmi does not say that he saw any documents to justify such payments, whether in addition to the N161bn that he had apparently reconciled on his audit in November 2008, or at all.

46. Mr Jimoh, the Head of Inspection Group of the Bank since November 2009, stated in paragraph 10 of his witness statement that the existence of what he calls the illegal share purchase scheme was kept hidden from the Bank’s Board of Directors, external auditors and the Central Bank of Nigeria, and that it was not until September 2009 that the significant sums which had apparently been spent on such share purchases were recorded by Mr Fabunmi in the Bank’s books as an investment. He explains, in paragraph 11, that neither he nor any members of the Inspection Group who had been involved in the Bank’s investigations had come across any written instructions given
to the stockbrokers involved in buying the Bank’s shares, nor of their terms of engagement.

47. As to the N18.6bn paid to the Tropics Companies, Mr Jimoh notes, in paragraph 14, that the Defendant’s case is that it was reimbursement for the cost of shares purchasedon the Bank’s behalf by Tropics Securities under the share purchase scheme, notwithstanding the lack of any contemporaneous documentation indicating the units of shares that had allegedly been acquired for which the payment is said to be a reimbursement.

48. He confirms, in paragraphs 16 and 17, that there was in late 2008 and early 2009 a reconciliation exercise undertaken by the Claimant to ascertain how many units of the Bank’s shares had been purchased by the Bank as of 31 December 2008, which showed that, as of 31 December 2008, 3,748,130,591 units of the Bank’s shares had been purchased through ISL, Summit and Tropics Securities between 2007 and 2008, at a cost of N140,969,395,020.83, broken down as per a schedule. There were memos,with attached letters, requesting payment and/or contract notes or other evidence of the number of units of the Bank shares purchased by the stockbroker. In those instances where contract notes could not be located, the payments to the stockbrokers had been matched to units of shares in the records. In this way the Claimant satisfied itself that as at 31 December 2008 Tropics Securities had acquired and been paid for the Bank’s shares in the amount of 283,357,199 units at a cost of N8,277,181,901.93.

There was also a schedule showing the total number of units of the Bank’s shares held by ISL and Summit on the Bank’s behalf.

49. In paragraph 20, he stated that no such correspondence as is referred to by Mr Dada, being requests for payments in respect of a backlog, has been located and that Mr Fabunmi did not provide copies of any such correspondence when he was questioned about the transactions at various times between September and November 2009, at which time he had unfettered access to the Bank’s records.

50. Mr Jimoh then describes, in paragraphs 21 to 23, the contrast between the lack of any documentation relating to sums due to Tropics Securities, compared with the clear audit trail that existed in relation to a similar claim by Summit. On 30 January 2009 Summit wrote to the Defendant, attaching evidence of the units of the Bank’s shares which Summit said it had purchased. Summit’s claim for payment in respect of the shortfall was investigated, and compared with the Claimant’s records, over a period of some five months, and in the end the Claimant agreed to pay half of Summit’s claim of approximately N312m in three monthly instalments.

51. Mr Jimoh concludes: “24. Given the way the Bank dealt with the shortfall in payment to Summit by way of a reconciliation process that lasted for about five months, it is inconceivable that it would not have conducted a similarly lengthy audit had it received an authentic request from Tropics Securities for payment in respect of a shortfall, in order to ascertain whether any such request was well-founded. This is more so when it is borne in mind that the alleged cumulative shortfall of N18.6 billion was approximately 50 times as much as that paid to Summit (N381 million) in respect of its shortfall and more than twice the total amount that had previously been paid to Tropics Securities for any share purchases (according to the reconciliation carried out as at 31 December 2008). However, on the contrary, no such audit exercise was carried out. In the first instance, N10 billion was paid to the Akingbola Companies a mere three days after 8 May 2009 when the Bank supposedly received a letter of demand from Tropics Securities, apparently on the basis of the
oral discussions between Mr Adebiyi, Mr Dada and Mr Fabunmi. In the second instance, 11 payments totalling N8.6 billion were paid principally to Akingbola Companies, mostly without any written demands and, again, apparently on the basis of conversations between Mr Adebiyi, Mr Dada and Mr
Fabunmi.

25. The Bank’s case remains that the payments totalling N18.6 billion to the Akingbola Companies and others in May and June 2009 were straight misappropriations of the Bank’s funds. The payments might have been made under the guise of the share purchase scheme but thus far there is not one iota of evidence of the Bank’s shares allegedly purchased.”

52. Finally in this regard Mr Jimoh refers, in paragraphs 56 to 58, to the way that Mr Fabunmi in the end (in November 2009) accounted for the payments to the Inspection Group. He provided a table which showed that Tropics Securities had acquired 1,397,684,119 units of the Bank’s shares at a value of N47.7bn, including the shares allegedly purchased with the N18.6bn which is the subject of the Tropics claims. He continues:

57. It is my view that this table is … a fiction. On his own evidence … Mr Fabunmi did not know the details of the Bank’s shares, including the number of units, that had allegedly been purchased by Tropics Securities for which the N18.6bn was said to be a reimbursement. Therefore I cannot see how he was able to calculate the total number of shares that had apparently been purchased by Tropics Securities … The only information he had was the total amount of the payments which had been debited to the Bank’s Time Deposit Account supposedly in connection with the purchase of the Bank’s shares.

58. As such, I believe that what Mr Fabunmi did in reaching his conclusion that Tropics Securities had bought 1,397,864,119 units of the Bank’s shares was to ascribe a fictitious price to the shares, which he claims were acquired by Tropics Securities for which the payments of N18.6bn was said to be a reimbursement … Mr Fabunmi simply ascribed a notional share price of N18.75 to the shares allegedly purchased with the payment of N18.6bn and from this calculated the number of units allegedly purchased. This was pure reconstruction by Mr Fabunmi … if the shares were allegedly purchased over a period of time, they could not all have been acquired at the same price.”

53. The Defendant put in a second witness statement. He stated (in paragraph 131) that he “had no reason not to believe” that documents supporting the case were within the Bank’s records, and that he was unable to obtain the records in Tropics Securities offices, to which he currently did not have access, and which would also show that the claim to payment was entirely valid. With regard to the payments to Tropics and

Summit:
i) (Paragraph 132): “There is a clear difference between the Summit claim,which was unclear and doubted and the well known outstanding claim of Tropics, which was not doubted but could not be paid due to liquidity problems …”

ii) (Paragraph 133):

“As I have already stated, the money outstanding to Tropics Securities had been the subject of almost 8 months of discussions, and the only reasons it had not been paid was the Bank’s lack of liquidity. There was no need for any lengthy or complicated investigation because it was acknowledged that the money was owed.”

54. Mr Dada, in his second witness statement, also referred to the documents he believed would be found in the Tropics offices, which had been sealed by the Economic and Financial Crimes Commission (“EFCC”), which documents he said should include correspondence between Tropics and the sellers of the shares, copies of letters sent to the Bank confirming their purchase, the share certificates and the relevant payment requests.

55. Mr Fabunmi put in a short second witness statement, standing by his previous account. However he made no response to paragraph 58 of Mr Jimoh’s witness statement, set out in paragraph 52 above.

56. I have referred in paragraph 9(i) above to the difficult task which a Claimant has, faced with an assertion of a defence, in persuading a court to reject such case summarily as unarguable. In particular, Ms Jones QC understandably relies on the assertion in the second witness statement of the Defendant, set out in paragraph 53 above, that he believes that there are documents which will support or corroborate the case which he and his witnesses are putting forward, which is said by the Defendant to be incredible. It is obvious that, where judgment is sought summarily, prior to disclosure by the Claimant and to the taking of interlocutory steps such as summonses for production of documents by third parties, it would inevitably be open to a defendant to assert that, even though he may not have a credible defence at present, he is being deprived of the opportunity of establishing that defence if judgment is given against him before any documents can be obtained. Thus there can be cases where, if it can be shown that there may be documents, not presently in the possession, custody or power of a defendant, which might become available by the time of trial, that could be, within Part 24.2 a “compelling reason why the case … should be disposed of at a trial”. It can even found the basis for an application, not made in this case, for disclosure prior to the resolution of a Part 24 application, such as was ordered by Goff J, prior to an Order 14 hearing, by way of an exceptional case for ordering discovery prior to summary judgment: Grindlays Bank Ltd v Henson (Commercial Court, 17 July 1980). Two areas are relied upon by the Defendant: first, documents which may be in the Bank’s possession, and, secondly, documents which may be in Tropics’
offices, which, as Mr Dada described (paragraph 54 above), have been sealed by the EFCC.

Documents at the Bank
57. I have set out above the powerful case that is made, particularly by Mr Jimoh, that, whereas there are documents in the Bank’s possession which document the share sales made through all three stockbrokers, including Tropics Securities, which were reconciled by Mr Fabunmi and his department in November 2008, totalling N161 billion (now the subject matter of the separate claim referred to in paragraph 6 above), there are however no documents which evidence any such share sales relating to the
payment of £68m (N18.6bn) by way of the Tropics payments. As to this:
i) Mr Jimoh and his team assert that they have found none. Mr Tickner, in his recent third witness statement referred to in paragraph 20 above, sought to cast doubt on this by reference to the documents there referred to. However, I remain wholly unimpressed by this suggestion. It is true that reference can be made to paragraphs 10 to 13 of Mr Jimoh’s second witness statement, which could be read so as to suggest that he is saying that there are no documents at all at the Bank evidencing any purchases of the Bank’s shares for their customers, but, as he explains in his third witness statement, it is clear that this is not what he intended to convey: and that in fact he was simultaneously casting doubt on the genuineness of such documents as there are (see paragraphs 46, 48 above) which relate to what he refers to as the Defendant’s new case (Option C, paragraph 8 above), while repeating that, in relation to the Tropics payments (paragraph 13), there is “no evidence of any shares allegedly purchased by Tropics Securities for which these payments could be said to represent a reimbursement”. The reality is, in fact, that:

a) All the four customers, the subject of the documents now exhibited by Mr Tickner, were in fact expressly referred to by Mr Jimoh in his first
witness statement in describing, and exhibiting, the documents, which indeed the Bank did have, showing the make-up of the N161 billion: Mr. Jimoh confirms that all four customers are recorded in the Claimant’s books as owners of the Bank’s shares, although he asserts that this is a front. He also exhibited to his witness statement a similar letter, from another customer, to those subsequently produced by Mr Tickner.

b) However, in any event, as is clear both from Mr Jimoh’s exhibited schedule and from the documents now produced by Mr Tickner, none of these four customers had any dealings with Tropics Securities, but all of them dealt with the other stockbrokers. Thus the newly exhibited documents not only do not add anything but (i) do not evidence in any way the case made as to the £68m paid to Tropics, nor (ii) falsify Mr Jimoh’s case that the Bank has no documents justifying any payments to Tropics over and above those reconciled in November 2008.

ii) In any event, what seems to me to be significant, when it is suggested that there may, notwithstanding the Claimant’s evidence to the contrary, be documents in the possession, custody or power of the Bank, is that there is no suggestion by any of the Defendant’s witnesses, and in particular by Mr Fabunmi, that there were any such documents in the possession of the Bank in May 2009 when the payments were made. Mr Fabunmi does not say, as set out above, that there were any documents when he authorised the payments: he says he relied simply on what he had been told by Mr Adebiyi. Further, Mr. Fabunmi does not suggest that there were any such documents when he looked again and carried out his further investigation, at the request of the Inspection Group, in November 2009, when he did his reconstruction, referred to by Mr Jimoh, set out in paragraph 52 above.

Documents at Tropics Offices 58. It is indeed the case that the offices at Tropics were sealed by the EFCC, who locked the doors and took away the keys. A ruling was made at the instance of the Tropics,Companies by Mrs Justice Obadina on 16 December 2009, in the High Court of Lagos, when, in a lengthy judgment dismissing the Tropics Companies’ application, she concluded that there was nothing to prevent the Tropics Companies from making copies of the documents in the custody of the EFCC, and indeed that there was nothing stopping the Tropics Companies from transacting their business in their premises while the EFCC investigations were ongoing. It appears that the Judge accepted a sworn affidavit from EFCC that Tropics were permitted to enter the premises. Chief Fagbohungbe, the Defendant’s Nigerian lawyer, however stated, in his first witness statement of 23 January 2011, that that decision was “rendered academic by subsequent events”, namely in that the EFCC obtained orders on 31 December 2009 for an interim attachment of various properties, including the Tropics offices, and that, although there is a pending appeal against that order in Nigeria, the attachment prevents entry into the Tropics offices. This is disputed by the Claimant, but more significantly the Claimant relies upon the second witness statement of Mr Opasanya, served as long ago as 8 July 2010, which exhibited an exchange of
correspondence between the Claimant’s Nigerian lawyers and the EFCC, when, by letter of 10 May 2010, those lawyers requested from EFCC “a written confirmation …as to whether it will allow Tropics Finance access to its office premises, even if such access will be supervised by the Commission”, and the EFCC’s Director of Operations replied, on 21 June 2010:

“The Executive Chairman has approved your request that the solicitors, witnesses and/or authorised representatives be granted access to Tropics Finance Limited as earlier requested by you. However this will be supervised by operatives and legal representatives of the Commission.”
59. Notwithstanding the exhibiting of these two letters to Mr Opasanya’s witness statement, no effort has been made by the Defendant to take up this suggestion. The reason is now given by Mr Tickner in his second witness statement that, although he accepts that those letters were exhibited on 8 July 2010, he had overlooked them (there being a change of representation on the part of the Defendant in November 2010), and the Defendant and Chief Fagbohungbe have confirmed they have not seen them. This is obviously most unfortunate, although the existence of the letters plainly detracts from any suggestion that in fact there would have been any difficulty in
obtaining entry to the offices for the purpose of taking copies of any documents there existing, had the Defendant only asked. However, no effort has been made at all, nor request made, by the Defendant, by Tropics or by Chief Fagbohungbe to obtain access to the premises, and the first such request was only made shortly before this hearing, by a letter dated 13 January 2011, to which the EFCC has made no reply. If reliance is
to be placed upon the absence of documentation which may exist in the Tropics offices – and again it must be pointed out that it is not suggested that, unlike Summit, Tropics supplied any such documentation in May 2009 when it made its requests for payment – the Court must be satisfied that reasonable steps have been taken to obtain such documents prior to summary judgment.

Assessment of the Evidence
60. Mr Browne-Wilkinson has laid considerable emphasis, so far as credibility of the Defendant is concerned, on what he categorises as the Defendant’s change of case referred to in paragraph 8 above

Post from: Finance Articles

Redeemed Church Pastor, Erastus Akingbola, To Surrender ?68 Million To Intercontinental Bank – Pastor Adeboye

Islamic Banking and Global Financial Market: Signs of Economic Growth

Introduction

The topic of my present research work is “Islamic Banking and global financial market” and how they are interrelated to lead to the sustainable growth of economic development. Islamic finance is closely related to Islam’s vision of economic development, which gives primary importance to the realization of socioeconomic justice and the well-being.
The subject of Islam and economic development raises a number of 
questions, one of which is about the relevance of the subject to a 
discussion forum on Islamic finance. This question is not difficult to 
answer because finance and development are very closely interrelated. 
Finance is not an end in itself; it is one of the essential means to 
development, which in turn leads to a rise in financial resources for 
accelerating development. The juxtaposition of Islam and economic 
development in the title also raises some other questions. One of these 
is whether Islam is an asset or a liability for development and whether 
Islam and development can coexist without hurting each other. If Islam 
is capable of promoting development then the second and third questions 
are about the kind of development that Islam visualizes, and the 
reasons for the failure of Muslim countries to realize development of 
this kind.

As the economic crisis deepens throughout the world, global financial institutions have set about to re evaluate the various systems and business models in place. It is no exaggeration to say that practically every mainstream and conventional banking institution has been affected by the global financial crisis. In contrast, the Islamic banking system has largely escaped the fallout from the financial crisis, thanks to rules that forbid the sort of risky business ventures that infected mainstream institutions.

There is no doubt that the current global financial crisis has presented the Islamic finance industry with an excellent opportunity to expand its appeal beyond Muslim investors as a safe haven from the speculative excesses. The message may have particular resonance in the West after the crumbling of the US mortgage market left banks holding hundreds of billions of dollars of nearly worthless credit instruments tied to home loans by a web of complex structures. Investors traumatized by the credit crisis are seeking assurances and security. The stricter rules imposed on lending by Islamic laws provide these assurances and security. Many of the speculative and highly risky structures and financing methods that have proven to be the nemesis of the western financial industry are forbidden under Islamic laws. Islamic finance practices are undoubtedly fiscally more conservative, requiring direct participation by investors in plans that do not involve esoteric strategies such as parking assets in off-balance-sheet vehicles.

While Islamic banking is no longer a novelty in the international financial world, the United States is yet to embrace this model. While some US financial institutions are venturing into this market, they are few and far between. According to some experts and financial gurus, the United States is almost a decade behind the European and Asian financial counterparts as far as the adoption and implementation of Islamic banking is concerned.

What Is Islamic Finance?

In order for one to understand how Islamic banks have virtually escaped unscathed from this financial crisis, it is essential to have a grasp of the basic fundamentals of Islamic finance. Islamic finance is based on shariah, or Islamic law, which in essence requires that gains be derived from ethical and socially responsible investments and discourages interest-based banking and investments. Islamic finance is fundamentally different from the conventional banking models as it is based on a profit and loss structure (PLS) and the prohibition of riba’ (interest). This structure requires that the financial institution invest with the client in order to finance the client’s transaction rather than lend money to the client. Due to the inherent risk involved in any investment, the financial institution is entitled to profit from the financial transaction. This is a stark contrast to modern finance in which interest is one of the key methods by which banks make money through their products, such as mortgages and personal loans.

Another fundamental distinction of an Islamic bank is the absence of insurance protecting client deposits found in conventional banks. While the PLS structure permits receipt of money by depositors when deposits invested have earned a profit, they must incur losses when deposit investments incur losses to comply with shariah mandates. Deposit insurance, such as the protection provided by the Federal Deposit Insurance Corporation, defeats the very purpose of the PLS model, as the depositor does not incur any risk. The deposit insurance is an integral part of the western banking regulations but is in direct conflict to the basic concepts of Islamic banking. The issue of deposit insurance has proven to be a major hurdle for western, primarily European, banks that wanted and have chosen to provide shariah-compliant products. European banks overcame this hurdle of deposit insurance by informing clients that the insurance was not shariah-compliant.[1]

Islamic banks have been marketing their services aggressively in the West. The conventional commercial banks have in direct competition with the purely Islamic banks begun offering Islamically structured products to their clients through “Islamic banking windows’. However, confusion exists about Islamic banking. In many minds, the prohibition of interest is the defining characteristic of Islamic banking, but it can be distinguished from conventional banking by its concern with spiritual values and social justice.

The fact that interest is prohibited does not mean capital is costless. Islam is not opposed to a return on capital. What it prohibits is the predetermined pricing of capital. The owners of capital have no right to ask for additional payment without sharing risk. Thus in lieu of fixed interest which is prohibited, the lender will be a participant in the enterprise. [2]

Islam and Banking

A. The Prohibition of Riba (interest): legal connotations

The Qur’an, or holy book of Islam, is the primary Islamic authority and it prohibits riba. The prohibition appears in several passages in the Qur’an. One passage states that God does not view interest as true wealth because it represents unearned income. Another passage condemns Jews for not obeying the Torah’s prohibition of interest.  A third passage condemns the compounding of interest upon default by stating “O believers, take not doubled and redoubled interest, and fear God so that you may prosper. Fear the fire which has been prepared for those who reject the faith . . . .” A final condemnation warns that those who receive riba are waging war with God and shall be “inhabitants of the fire and abide there forever.” Scholars have noted that the taking of riba is on par with repeated adultery and deemed more sinful than maternal incest–two crimes in Islamic criminal law that are punishable by death.

The riba prohibition reflects the Islamic view that accumulating wealth through collecting riba is not a legitimate mode of “work”. Islam values capital when it is the product of labour and risk-taking. When a lender charges interest for capital, he receives a reward without adding his labour and without regard to the success or failure of the borrower’s venture. The benefit of the loan to the lender is certain while the benefit of the capital to the borrower is uncertain. Islam views these transactions as necessarily including unfair allocations of risk and justifying reward for a passively acquired return on capital. Riba is thus exploitive vies-a-vies the borrower and its prohibition limits the extent to which one party may be disadvantaged by the other party in financial transactions.

Prohibiting economic exploitation is important in Islam because Allah wills his followers to accumulate wealth in a manner that achieves social justice. Social justice, however, should not be mistaken to mean that Allah wanted people to be equal in wealth. Muslims believe that God “deliberately created disparities in the distribution of goods in this world.” Rather, social justice supported by legitimate work means that “no one may claim more than he has earned” and may not use wealth to disparage others. This thought, when applied to conventional banking, means that investments cannot be viewed solely through the lens of achieving the highest profit margin. Instead, Islam places accession to wealth in relation to spiritual costs to the individual and social costs to the community.

Outside of social justice, Islamic scholars have also offered economic critiques of interest that support its prohibition. Scholars have argued that the unjust allocation of risk between borrower and lender creates a “penalty upon entrepreneurial initiative.” In a truly competitive market, Islamic scholars believe it to be unlikely that an investment could result in gross profits that also cover the interest. Since capital would be unproductive without entrepreneurial input, the disincentive to create wealth hinders economic growth.[3]

Ideological issues involved in Islamic Banking mechanism

Twenty years ago, Islamic banks were unknown; today, they number in the hundreds worldwide and hold more than U.S. 0 billion in assets. In the world of global finance, this is not a large amount, but its growth rate is substantial. Furthermore, the concept is discussed heatedly in every Muslim country.

In light of Islam’s rapid development, especially in countries like the United Kingdom, France and the United States, Islamic banks will likely play a role in the development and globalization of world financial markets. But more importantly, Islamic banking offers a means of reintroducing ethics into the global financial system.[4]

At a time when global economic forces are causing great hardship for people around the world, and the harsh demands of the market seem to supersede concern for the well-being of fellow humans, Islamic banking may serve as a means of re-imbuing modern banking with ethical norms. Within the broader financial system, Islamic finance can play a role in re establishing a sense of ethics that has been lost and to try to make its concept and products acceptable to ethically minded Muslims, Christians, Jews and others who are engaged in financial transactions.
As a religion based upon justice, Islam can serve as an ethical framework for regulating monetary transactions between people and, in this way, influence the global market place.

The words “Islamic banking” has a strong emotional effect. In the Islamic world, some individuals and institution representatives talk as if patronizing Islamic banks makes them more pious than those who patronize traditional banks. For many more, there is a certain pride in knowing that their institutions, organized under their religious laws, have successfully adapted modern financial instruments yet remained true to the tenets of their religion. Others, however, both Muslim and non-Muslim, feel certain uneasiness. To use an American expression, there is a certain sense of “in-your-face” about the term “Islamic banking,” a certain defiance of the secular Western edifice. This ideological bent to Islamic banking greatly obfuscates the true value of Islam to the financial world. As mentioned above, Islamic banking should not be applied from a rigorously legalistic viewpoint, especially regarding interest. Rather, it should emphasize the application of social justice in the financial realm, a notion that has been forgotten by Western banking institutions.
Much writing on Islamic banking has a strong ideological bent. There seems to be an assumption that Islamic banking is a newly developed thought, a new form of Islamic ijtihad, or exegesis of the religious texts.[5] S.H. Homood has pointed out that interest and usury are discussed in the Bible (Ezekiel, 18:8, Deuteronomy 23:19). These paragraphs, which apply to Jews and Christians alike, clearly forbid the use of usury in dealing with people. For centuries, Christians had a very strong prejudice against interest, which they used, however reluctantly.

Despite the above-mentioned pride in Islamic banking, there also is certain ambivalence. While conservatives argue that it is impious for Muslims to participate in Western and Western-style financial institutions, others argue that there have been various forms of interest-style lending in the Islamic world for centuries. Given that previous generations of Muslims did not appear to have wrestled with their consciences over it, many Muslims today resent being described as sinners for similar activities

Trends in Islamic banking system
Financial markets as a whole, including Islamic ones, are going through constant change. The globalization of markets has placed a premium on profits at all costs. Islamic banks also are going through changes. Of course, the concept of creating Islamic instruments is quite new, and this new industry, like any other, has to find its own way.
Today, the trend in Islamic banking appears to be toward the development of boutique Islamic investment banks. In fact, a number of relatively new institutions are not banks in the traditional sense. They are closer to what the U.S. comptroller of the currency calls “non-bank banks.” These institutions focus on a precise instrument. For example, the Islamic Leasing Company of Bahrain borrows money from other banks, including, but not exclusively, its parent, Al-Faisal Investment Bank. There is a privately held company in Jeddah that provides consumer loans on an Islamic basis. As mentioned above, Al-Baraka invests the funds of sophisticated buyers, somewhat like a privately held merchant bank in Europe. Islamic mutual funds are growing strongly. There also are a large number of Islamic funds in the United States investing in a variety of instruments, from shares to mortgages.[6]
Islamic institutions have been springing up almost everywhere Muslims live. There appear to be many of these institutions emerging in former Soviet Central Asia. It will be particularly interesting to follow the contribution of Islamic banks to development in the Commonwealth of Independent States, particularly in countries such as Kazakhstan and Uzbekistan.
In the world of global international capital, Islamic banking is not a large force, but its role in the Muslim world and its influence worldwide are potentially large. Beyond the rhetoric of piety surrounding Islamic banking and the legalistic discussion of the use of interest, is a more important issue, the idea of justice. Practitioners and theorists in the field must move beyond these discussions and work to increase the visibility of Islamic banking to facilitate its most important contribution: the reintroduction of ethics into financial transactions.

Conceptual Analysis of Islamic Banking System

Islamic banking refers to a system of banking or banking activity that is consistent with the principles of Islamic law (Shariah) and its practical application through the development of Islamic economics. Shariah prohibits the payment of interest fees for the lending of money (Riba, usury) for specific terms, as well as investing in businesses that provide goods or services considered contrary to its principles (Haraam, forbidden). While these principles were used as the basis for an economy in earlier times, it is only in the late 20th century that a number of Islamic banks were formed to apply these principles to private or semi-private commercial institutions within the Muslim community.

Islamic banking has gained momentum; controversy has arisen over role and methods of operation in financial intermediation. Acting as an Islamic bank means following the principles of shariah in financial transactions, but definition is difficult because of the many ways that Islamic law is interpreted and applied.

Most critics note that it is theoretically possible to act as an Islamic bank only in a totally Islamic financial system. Yet, in all countries where they are operating, Islamic banks are still in minority and follow a system and practice that does not parallel that of other banks operating in same community. To interact successfully with other financial institutions, Islamic banks can follow shariah laws only to the extent that they remain competitive with interest based financial institutions. Even in Pakistan, where uniform Islamic financial system has been proposed, the eventual success of Islamic banks depends upon thier success in international finance.

Defining Islamic banks has become increasingly difficult in recent years because many have expanded their banking services and methods of financing to include international market and non banking ventures. For example there is one successful organisation called “Dar-al-Maal al Islami” which defines itself as an Islamic financial institution rather than Islamic bank.

While some bankers felt, Islamic banks do act as intermediaries because they buy and sell commodities and are identical to conventional banks in many respects. The difference is mainly cosmetic. Even though Islamic banks may perform an intermediary functions, they do not necessarily do so Islamically.[7]

History of Islamic Banking

Ø Classical Islamic banking

During the Islamic Golden Age, early forms of proto-capitalism and free markets were present in the Caliphate, where an early market economy and an early form of mercantilism were developed between the 8th-12th centuries, which some refer to as “Islamic capitalism”. A vigorous monetary economy was created on the basis of the expanding levels of circulation ofa stable high-value currency (the dinar)and the integration of monetary areas that were previously independent.

A number of innovative concepts and techniques were introduced in early Islamic banking, including bills of exchange, the first forms of partnership(mufawada) such as limited partnerships (mudaraba), and the earliest forms of capital (al-mal), capital accumulation (nama al-mal), cheques, promissory notes, trusts, start up companies transactional accounts, loaning, ledgers and assignments.

Organizational enterprises similar to corporation’s independent from the state also existed in the medieval Islamic world, while the agency institution was also introduced during that time. Many of these early capitalist concepts were adopted and further advanced in medieval Europe from the 13th century onwards.[8]

Ø Modern Islamic banking

The first modern experiment with Islamic banking was undertaken in Egypt under cover without projecting an Islamic image—for fear of being seen as a manifestation of Islamic fundamentalism that was anathema to the political regime. The pioneering effort, led by Ahmad Elnaggar, took the form of a savings bank based on profit-sharing in the Egyptian town of Mit Ghamr in 1963. This experiment lasted until 1967 (Ready 1981), by which time there were nine such banks in the country.[9]

In 1972, the Mit Ghamr Savings project became part of Nasr Social Bank which, till date, is still in business in Egypt. In 1975, the Islamic Development Bank was set-up with the mission to provide funding to projects in the member countries. The first modern commercial Islamic bank, Dubai Islamic Bank, opened its doors in 1975. In the early years, the products offered were basic and strongly founded on conventional banking products, but in the last few years the industry is starting to see strong development in new products and services.

Islamic Banking is growing at a rate of 10-15% per year and with signs of consistent future growth. Islamic banks have more than 300 institutions spread over 51 countries, including the United States through companies such as the Michigan-based University Bank, as well as an additional 250 mutual funds that comply with Islamic principles. Conservative estimates suggest that over US0 billion of assets are managed according to Islamic investment principles.

The World Islamic Banking Conference, held annually in Bahrain since 1994, is internationally recognized as the largest and most significant gathering of Islamic banking and finance leaders in the world.

The Vatican has put forward the idea that “the principles of Islamic finance may represent a possible cure for ailing markets.”[10]

Interest free banking: Its Legal aspects involved

In order to better understand the logic and legal principles of the working of Islamic banks and how they are related to today’s economy, it is better to concentrate first on certain aspects of Islamic law as provided under Islamic law i.e. Sharia.

What is the Sharia?

Shariah is the sacred law of Islam and is the whole body of ethical and legal rules elucidated through the discipline of Fiqh (jurisprudence). The two primary sources of Islamic Sharia law are the Koran (the holy scriptures) and the Sunnah (rules deduced from the sayings and conduct of the Holy Prophet, peace be upon him). The primary sources are supplemented by the two dependent sources namely, Ijma (consensus) and Qiyas (reasoning by analogy), which is similar to the process of English law in so far as it seeks to extract the general principles underlying a decision from the particular facts of the case and applying it to analogous cases that arise later. The works of the four great jurists of the Classical period, Abu Hanifa, Anas Ibn Malik, Muhammad Al Shafi and Ahmad Ibn Hambal, must be considered. The corpus of literature developed by these schools refers to methods that were developed to work out a path around the Shariah doctrines that were considered inconvenient or unsuited to contemporary practice. The key principles enshrined in the Shariah which shape the way Islamic finance has evolved are riba (interest), gharar (uncertainty), maisir (speculation or gambling) and haram (prohibited commodities).

Nature of riba

The Koran categorically prohibits the giving or receiving of interest, regardless of the purpose for which the loan is made and regardless of the rate of interest charged. Although there is consensus among the Muslim scholars that riba is banned, controversy exists over what the concept actually is, and consequently what financial transactions are prohibited.[11]

Islamic scholars differ on the scope of prohibition of riba. Dr Siddiqui in his book on Islamic banking* attempts to resolve the issue when after examining and debating on the true nature of riba he reaches the conclusion that bank interest in all its forms and intent is riba.[12]

Sharia’s role in the structuring of transactions

All current concepts of Islamic banking are drawn from Islamic financial practice, found unobjectionable and subsequently institutionalised in Islamic law. The law itself is clear but its translation into modern rapidly evolving financial products and practice is inevitably open to different interpretations. Although there is a substantial literature on the methods of financing, there exists no practical guide to Islamic financial instruments and no universally acknowledged manual for the Islamic banker to follow. Indeed there is considerable divergence in the financial practice between institutions.

The answer to the problem of structuring Islamic financial products is to understand in particular that part of the Sharia law known as “Muamallat, fiqh’, which pertains to commercial transactions. Modern Islamic banking draws its legitimacy from reasoning going back to the medieval Islamic jurists. It borrows heavily from the specific financial instruments that had legal sanction in the conduct of medieval commerce.

Legal Principles involved in Islamic Banking

Islamic banking has the same purpose as conventional banking except that it operates in accordance with the rules of Shariah, known as Fiqh al-Muamalat (Islamic rules on transactions). The basic principle of Islamic banking is the sharing of profit and loss and the prohibition of riba (usury). Common terms used in Islamic banking include profit sharing (Mudharabah),safekeeping (Wadiah), joint venture (Musharakah), cost plus (Murabahah), and leasing (Ijarah).

In an Islamic mortgage transaction, instead of loaning the buyer money to purchase the item, a bank might buy the item itself from the seller, and re-sell it to the buyer at a profit, while allowing the buyer to pay the bank in instalments. However, the fact that it is profit cannot be made explicit and therefore there are no additional penalties for late payment. In order to protect itself against default, the bank asks for strict collateral. The goods or land is registered to the name of the buyer from the start of the transaction. This arrangement is called Murabaha.

Another approach is EIjara wa EIqtina, which is similar to real estate leasing. Islamic banks handle loans for vehicles in a similar way (selling the vehicle at a higher-than-market price to the debtor and then retaining ownership of the vehicle until the loan is paid).

An innovative approach applied by some banks for home loans, called Musharaka al-Mutanaqisa, allows for a floating rate in the form of rental. The bank and borrower form a partnership entity, both providing capital at an agreed percentage to purchase the property. The partnership entity then rents out the property to the borrower and charges rent. The bank and the borrower will then share the proceeds from this rent based on the current equity share of the partnership. At the same time, the borrower in the partnership entity also buys the bank’s share of the property at agreed instalments until the full equity is transferred to the borrower and the partnership is ended. If default occurs, both the bank and the borrower receive a proportion of the proceeds from the sale of the property based on each party’s current equity. This method allows for floating rates according to the current market rate such as the BLR (base lending rate), especially in a dual-banking system like in Malaysia.

There are several other approaches used in business transactions. Islamic banks lend their money to companies by issuing floating rate interest loans. The floating rate of interest is pegged to the company’s individual rate of return. Thus the bank’s profit on the loan is equal to a certain percentage of the company’s profits. Once the principal amount of the loan is repaid, the profit-sharing arrangement is concluded. This practice is called Musharaka. Further, Mudaraba is venture capital funding of an entrepreneur who provides labour while financing is provided by the bank so that both profit and risk are shared. Such participatory arrangements between capital and labour reflect the Islamic view that the borrower must not bear all the risk/cost of a failure, resulting in a balanced distribution of income and not allowing lender to monopolize the economy.

And finally, Islamic banking is restricted to Islamically acceptable transactions, which exclude those involving alcohol, pork, gambling, etc. Thus ethical investing is the only acceptable form of investment, and moral purchasing is encouraged. In theory, Islamic banking is an example of full-reserve banking, with banks achieving a 100% reserve ratio. However, in practice, this is not the case, and no examples of 100 per cent reserve banking are observed.[13] Islamic banks have grown recently in the Muslim world but are a very small share of the global banking system. Micro-lending institutions founded by Muslims, notably Grameen Bank, use conventional lending practices and are popular in some Muslim nations, especially Bangladesh, but some do not consider them true Islamic banking. However, Muhammad Yunus, the founder of Grameen Bank and microfinance banking, and other supporters of microfinance, argue that the lack of collateral and lack of excessive interest in micro-lending is consistent with the Islamic prohibition of usury (riba).

Shariah Advisory Council/Consultant

Islamic banks and banking institutions that offer Islamic banking products and services (IBS banks) are required to establish a Shariah Supervisory Board (SSB) to advise them and to ensure that the operations and activities of the bank comply with Shariah principles. On the other hand, there are also those who believe that no form of banking can ever comply with the Shariah. In Malaysia, the National Shariah Advisory Council, which additionally set up at Bank Negara Malaysia (BNM), advises BNM on the Shariah aspects of the operations of these institutions and on their products and services. In Indonesia the Ulama Council serves a similar purpose.

A number of Shariah advisory firms (either standalone or subsidiaries of larger financial groups) have now emerged to offer Shariah advisory services to the institutions offering Islamic financial services. Issue of independence, impartiality and conflicts of interest have also been recently voiced.

Islamic financial transaction terminology

Bai’ al-inah (sale and buy-back agreement)

The financier sells an asset to the customer on a deferred-payment basis, and then the asset is immediately repurchased by the financier for cash at ownership over the asset in order to protect against default without explicitly charging interest in the event of late payments or insolvency. Some scholars believe that this is not compliant with Shariah principles.

Bai’ bithaman ajil (deferred payment sale)

This concept refers to the sale of goods on a deferred payment basis at a price, which includes a profit margin agreed to by both parties. This is similar to Murabaha, except that the debtor makes only a single instalment on the maturity date of the loan. By the application of a discount rate, an Islamic bank can collect the market rate of interest

Bai muajjal (credit sale)

Literally bai muajjal means a credit sale. Technically, it is a financing technique adopted by Islamic banks that takes the form of murabaha muajjal. It is a contract in which the bank earns a profit margin on the purchase price and allows the buyer to pay the price of the commodity at a future date in a lump sum or in instalments. It has to expressly mention cost of the commodity and the margin of profit is mutually agreed. The price fixed for the commodity in such a transaction can be the same as the spot price or higher or lower than the spot price.

Mudarabah (profit sharing)

Mudarabah is an arrangement or agreement between the bank, or a capital provider, and an entrepreneur, whereby the entrepreneur can mobilize the funds of the former for its business activity. The entrepreneur provides expertise, labour and management. Profits made are shared between the bank and the entrepreneur according to predetermined ratio. In case of loss, the bank loses the capital, while the entrepreneur loses his provision of labour. It is this financial risk, according to the Shariah, that justifies the bank’s claim to part of the profit. The profit-sharing continues until the loan is repaid. The bank is compensated for the time value of its money in the form of a floating rate that is pegged to the debtor’s profits

Murabahah (cost plus)

“Mudarabah” is a special kind of partnership where one partner gives money to another for investing it in a commercial enterprise. The investment comes from the first partner who is called “rabb-ul-mal”, while the management and work is an exclusive responsibility of the other, who is called “mudarib”. This concept refers to the sale of goods at a price, which includes a profit margin agreed to by both parties. The purchase and selling price, other costs, and the profit margin must be clearly stated at the time of the sale agreement. The bank is compensated for the time value of its money in the form of the profit margin. This is a fixed-income loan for the purchase of a real asset (such as real estate or a vehicle), with a fixed rate of profit determined by the profit margin. The bank is not compensated for the time value of money outside of the contracted term (i.e., the bank cannot charge additional profit on late payments); however, the asset remains as a mortgage with the bank until the Murabaha is paid in full.

This type of transaction is similar to rent-to-own arrangements for furniture or appliances that are very common in North American stores.

Musawamah

Musawamah is the negotiation of a selling price between two parties without reference by the seller to either costs or asking price. While the seller may or may not have full knowledge of the cost of the item being negotiated, they are under no obligation to reveal these costs as part of the negotiation process. This difference in obligation by the seller is the key distinction between Murabaha and Musawamah with all other rules as described in Murabaha remaining the same. Musawamah is the most common type of trading negotiation seen in Islamic commerce.

Bai salam

Bai salam means a contract in which advance payment is made for goods to be delivered later on. The seller undertakes to supply some specific goods to the buyer at a future date in exchange of an advance price fully paid at the time of contract. It is necessary that the quality of the commodity intended to be purchased is fully specified leaving no ambiguity leading to dispute. The objects of this sale are goods and cannot be gold, silver, or currencies based on these metals. Barring this, Bai Salam covers almost everything that is capable of being definitely described as to quantity, quality, and workmanship.

Hibah (gift)

This is a token given voluntarily by a debtor to a creditor in return for a loan. Hibah usually arises in practice when Islamic banks voluntarily pay their customers a ‘gift’ on savings account balances, representing a portion of the profit made by using those savings account balances in other activities.

It is important to note that while it appears similar to interest, and may, in effect, have the same outcome, Hibah is a voluntary payment made (or not made) at the bank’s discretion, and cannot be ‘guaranteed.’ However, the opportunity of receiving high Hibah will draw in customers’ savings, providing the bank with capital necessary to create its profits; if the ventures are profitable, then some of those profits may be gifted back to its customers as Hibah.

Ijarah

Ijarah means lease, rent or wage. Generally, Ijarah concept means selling benefit or use or service for a fixed price or wage. Under this concept, the Bank makes available to the customer the use of service of assets / equipments such as plant, office automation, motor vehicle for a fixed period and price.

Musharakah (joint venture)

Musharakah is a relationship between two parties or more, of whom contribute capital to a business, and divide the net profit and loss pro rata. This is often used in investment projects, letters of credit, and the purchase or real estate or property. In the case of real estate or property, the bank assesses an imputed rent and will share it as agreed in advance. All providers of capital are entitled to participate in management, but not necessarily required to do so. The profit is distributed among the partners in pre-agreed ratios, while the loss is borne by each partner strictly in proportion to respective capital contributions. This concept is distinct from fixed-income investing (i.e. issuance of loans).

Qard hassan/ Qardul hassan (good loan/benevolent loan)

This is a loan extended on a goodwill basis, and the debtor is only required to repay the amount borrowed. However, the debtor may, at his or her discretion, pay an extra amount beyond the principal amount of the loan (without promising it) as a token of appreciation to the creditor. In the case that the debtor does not pay an extra amount to the creditor, this transaction is a true interest-free loan. Some Muslims consider this to be the only type of loan that does not violate the prohibition on riba, since it is the one type of loan that truly does not compensate the creditor for the time value of money.

Sukuk (Islamic bonds)

Sukuk is the Arabic name for a financial certificate but can be seen as an Islamic equivalent of bond. However, fixed-income, interest-bearing bonds are not permissible in Islam. Hence, Sukuk are securities that comply with the Islamic law (Shariah) and its investment principles, which prohibit the charging or paying of interest. Financial assets that comply with the Islamic law can be classified in accordance with their tradability and non-tradability in the secondary markets.

Takaful (Islamic insurance)

Takaful is an alternative form of cover that a Muslim can avail himself against the risk of loss due to misfortunes. Takaful is based on the idea that what is uncertain with respect to an individual may cease to be uncertain with respect to a very large number of similar individuals. Insurance by combining the risks of many people enables each individual to enjoy the advantage provided by the law of large numbers.

Wadiah (safekeeping)

In Wadiah, a bank is deemed as a keeper and trustee of funds. A person deposits funds in the bank and the bank guarantees refund of the entire amount of the deposit, or any part of the outstanding amount, when the depositor demands it. The depositor, at the bank’s discretion, may be rewarded with Hibah as a form of appreciation for the use of funds by the bank.

Wakalah (power of attorney)

This occurs when a person appoints a representative to undertake transactions on his/her behalf, similar to a power of attorney.

Islamic equity funds

Islamic investment equity funds market is one of the fastest-growing sectors within the Islamic financial system. Currently, there are approximately 100 Islamic equity funds worldwide. The total assets managed through these funds currently exceed US billion and is growing by 12–15% per annum. With the continuous interest in the Islamic financial system, there are positive signs that more funds will be launched. Some Western majors have just joined the fray or are thinking of launching similar Islamic equity products.

Despite these successes, this market has seen a record of poor marketing as emphasis is on products and not on addressing the needs of investors. Over the last few years, quite a number of funds have closed down. Most of the funds tend to target high net worth individuals and corporate institutions, with minimum investments ranging from US,000 to as high as US million. Target markets for Islamic funds vary; some cater for their local markets, e.g., Malaysia and Gulf-based investment funds. Others clearly target the Middle East and Gulf regions, neglecting local markets and have been accused of failing to serve Muslim communities.

Since the launch of Islamic equity funds in the early 1990s, there has been the establishment of credible equity benchmarks by Dow Jones Islamic market index (Dow Jones Indexes pioneered Islamic investment indexing in 1999) and the FTSE Global Islamic Index Series. The Web site failaka.com monitors the performance of Islamic equity funds and provides a comprehensive list of the Islamic funds worldwide.[14]

Understanding the Islamic prohibition of interest

Why there is a need of Islamic Banking System

Both the sources of law regarding the prohibition of riba and interpretations of the prohibition that call for its universal application show that riba is in direct conflict with Islamic ideals and precepts. Much of the confusion that arises in the non-Islamic world regarding Islam’s interest prohibition is based on an isolated view of the prohibition. In other words, unless the totality of Islam as a religion is taken into account, an analysis of riba from a peripheral perspective will remain inadequate. The above examination of the goals of Islam, the specific textual prohibitions of riba, and interpretations regarding its application to all forms of interest should provide the foundation for a sufficient understanding of Islamic banking and finance.

With a deeper understanding, it is possible to move into a specific analysis of the need for Islamic banking, its principles, and the alternative methods of banking that arise out of these principles. Such an analysis will illustrate that Islamic and non-Islamic systems of banking can not only co-exist, but also can benefit from one another.

The Need for and Principles of Islamic Banking and Finance

The Islamic banking and finance movement is the result of a recent resurgence felt throughout the Muslim world, one that emphasizes a stricter adherence to the Shari’ah in all areas of governance. According to some, this resurgence in religious conservatism is largely the result “of a long prevailing identity crisis being experienced by Muslims. The self-pride of Muslims that came from having been conquerors and rulers for over a millennium was battered by the shocking reality of Western military and technological superiority.” This sociological phenomenon can be explained in the context of Islamic history. Once the prohibition of riba came into conflict with the current modes of banking and finance (which were based on Western models), devout Muslims were, and continue to be, extremely embarrassed.  The ban on interest had a limited effect as evidenced by the variety of legal loopholes (hiyal) that were created to get around the ban.  More importantly, “most non-Muslims writing on Islamic law saw only this negative aspect of the matter and were prompt to tax Muslims with shallowness and religious hypocrisy.” Furthermore, the success of socio-economic ideologies such as capitalism has contributed to this weakened self-pride. Perhaps in an attempt to develop a strong Muslim identity, Muslim communities have reacted through the current Islamic banking and finance movement and its attempt strictly comply.
Though the goal of strict compliance is clear, there are significant problems regarding its implementation. As previously mentioned, the Islamic system of banking and finance was based on capitalistic models of interest-based banking. Though there was a strong resurgence in the revival of Islamic values, Muslims were hard-pressed to find a “quick fix” to the problems associated with following practices that did not comport with the Shari’ah. In a sense, Muslims were put in an inherently unfair position because of the unrealistic expectation that they refrain from involvement in riba transactions because the ruling economic order of the time was interest-based. The Islamic world, consequently, needed an entirely new system that was wholly based on the value and goal of Islam and shariah law, which is fountainhead.

This need led to the problem of ascertaining a method of banking and finance that would provide similar incentives to those of interest-based banking alternatives (i.e., incentives for both the lender and borrower to enter into banking transactions) while also strictly adhering to the Shari’ah. As previously mentioned, Islam encourages the accumulation of wealth so long as it is used for the benefit of society as a whole in conformance with Islam’s objectives. [15] Outsiders unfamiliar with the Islamic paradigm may think it impossible to effectively administer an interest-free system of banking and finance because of the broad application of the term interest. After all, anything above the amount of the principal could be considered interest, and as such, it might be prohibited under the Shari’ah. This view, however, is overly narrow since it does not take into account the fact that the Islamic system values capital when it is the product of work.  It should also be noted that the term ‘work’ carries a broad connotation and includes the idea of risk, which is fundamental to the effective operation of Islamic banking and finance methods. “To put it differently, investors in the Islamic order have no right to demand a fixed rate of return. No one is entitled to any addition to the principal sum if he does not share in the risks involved.” Thus, the basis for Islamic banking and finance transactions is the principal of shared risk allocation.
As a general matter, for both parties in a financial transaction to receive any benefit in addition to the principal amount invested, they must share the risks involved in the transaction. In other words,

“…an Islamic bank should share in the risk with the entrepreneur which is in sharp contrast with the interest-based bank. Islamic banking implies zero rate of interest but not zero rate of return as Islamic banks do not deal in money but deal with money.” This general idea of shared risk allocation buttresses the viability of the Islamic economic model, and it gives rise to a number of banking methods that have been employed in an attempt to provide Shari’ah-compliant alternatives to traditional banking. One can better understand such alternative methods by tracing the evolution of Islamic banking from its inception to its present.[16]

Comparative analysis of Islamic and commercial banks

Now, a question arises, that what is the effect of “interest” on capitalism and Islamic banks.

The current financing methods used by Islamic banks are helpful in clarifying many issues that obfuscate the necessary understanding that non-Islamic countries need in order to achieve economic cooperation with the Islamic world. It should be apparent by now that not only are interest-free financial solutions available they are very much successful. However, a comprehensive understanding of Islamic banking and finance would not be complete without a comparative analysis of the two systems. The following comparison between capitalist systems and the Islamic financial system, as they apply to interest, should contribute to this comprehensive understanding of Islamic banking system.

Differences in the sources of law
The most appropriate starting point for a comparison between the two systems and one that yields a great deal of differences, is an examination of the origin of the law. The sources of law in Islam are fundamentally different from those of most countries that operate under a capitalist paradigm.  The legal tradition of the West is wholly dependent upon the individual reasoning of judges, jurists, legal scholars, and the like. For instance, in countries that adopt a common law approach, a particular class of individuals makes the law, and the law evolves based on the opinions of those individuals as applied to particular circumstances. The Shari’ah, however, puts little faith in man’s ability to reason, which is evidenced by the fact that governance through individual reasoning is an option only in the last resort.
Another marked difference between the Islamic system and its Western counterpart was evidenced in the relationship between the practice of Islam and economics. Unlike many societies based on a capitalistic paradigm, where economics and religion are distinct entities, Islam cannot and does not separate religion from economics or from any other aspect of society. Islam is not only a religion, but also a system of governance. In fact, concepts in the West, such as separation of church and state in the United States, are in direct opposition to the objectives of Islam. Islam is a religion that permeates every aspect of the life of a Muslim, and countries ruled by the Shari’ah must adhere to this permeation. The Shari’ah is not only a mandate from God on how to live one’s life individually, but also is a command on how individuals are to live collectively in a society. It is vital to understand this philosophical divide between the West and the Islamic world. After all, without this basic appreciation of the Islamic worldview, it is impossible to have an actual insight into the system.

Conceptual Differences of Interest

The next point of comparative analysis is the differences in the conception of interest between the two systems. As previously mentioned, to the capitalist West, a mode of banking and finance absent the concept of interest is a virtual impossibility. In a capitalistic society, the ability for one to reap profit from investment is the most valued concept of economics. This profit is usually in some form of interest. [17] The incentive to invest in a mutual fund, for instance, is that the principal amount of money invested will over time yield a value equal to a certain percentage rate of the initial investment, i.e., interest. Likewise, when a bank loans money to an individual, it does so on the basis that it will receive profit by adding a certain percentage of money to the amount of the initial loan to be repaid which is also an interest.
Indeed, the very entrepreneurial spirit of a capitalist society is wholly dependent on the concept of interest. It would be very difficult to imagine how the United States,  a country that epitomizes capitalism, could survive if lending institutions were not given an incentive to make funds available to those who dream of owning their own businesses. In fact, interest is so pivotal a concept to the capitalist system that a mere statement one way or the other regarding the raising or lowering of interest rates by Federal Reserve Chairman Alan Greenspan has the potential of crippling the entire economy.[18] Many Americans have such a significant amount of capital invested in interest-bearing accounts such as stocks, bonds, mutual funds, and savings accounts, that any minor fluctuation in the rates of interest could have an extremely damaging impact. These views of interest are in direct opposition to Islamic fundamentals of banking and finance that strictly prohibit interest.  In his book, it illustrates this point by noting that the vast amounts of capital attained by banks from millions of depositors (the small players in the system) are being given to only a small percentage of the population (the big players in the system). [19]

Comparison from a characteristics Prospective:

The significance of these conceptual differences lies in the fact that it is the very differences, which establish the divergence between the two systems and make economic cooperation difficult. A comparison between the two systems that goes beyond conceptualism will show that the differences can be overcome and that economic cooperation between the Islamic system and capitalism is attainable. A useful study that is applicable to the present comparative analysis involves a comparison of characteristics that can be generally found in all economic systems. [20] The eight factors used in the study are (1) the level of economic development of the system, (2) the resource base, (3) the ownership-control of the means of production, (4) the locus of economic power, (5) the motivational system, (6) the organization of economic power, (7) the social process for economic coordination, and (8) the distribution of income and wealth.  When the comparison is viewed from this perspective, there are surprisingly few differences. The major differences are in the motivational system, the organization of economic power, and the distribution of income.
This suggests that both systems are oriented towards the attaining of profit, though for different purposes. The capitalist system seeks profit not as a means, but as an end that will satisfy the individual, while the Islamic system uses profit as a means to achieve its spiritual ends. Viewed from this perspective, it seems that this difference is not insurmountable. Indeed, both systems can cooperate very well to achieve a profit. Once they attain profit, they can then use it for their respective different purposes and ends which are contemplated.

Next, the organization of economic power refers to “centralization versus decentralization with regard to government administration.” In the capitalist system, this factor is characterized by a vast discretion of individual choice and a highly decentralized government administration. The Islamic system is similar, but it adds restricted areas for the choice of businesses that harm society’s interests. After all, “the general objective of Islamic banks is to develop the economy within and according to Islamic principles. In no eventuality, therefore, can such banks engage in the alcoholic beverage trade …” Again, this difference can be overcome by keeping in mind that cooperation between the two systems in regard to the formation and financing of business must be done by respecting the Islamic societal interests imposed by the Shari’ah. A clear example of a breach of respect would be the case of a business venture between the two systems that either directly or indirectly financed the alcohol trade. This would be a clear violation of the interests of the Islamic society and, as such, the transaction should not happen and therefore it should be avoided.

The third major difference between the two systems is the criterion of distribution of income, which “distinguishes systems according to how people obtain their income (labour, capital) and to the degree of inequality in income, property and/or opportunity.” Distribution of income in the capitalist system is described as “distribution according to market-determined contributions to production, with the possibility of considerable inequality in income and property.” The Islamic system is quite different and is characterized by “equitable distribution of income and decentralisation of wealth in the society with recognition of differences in individuals’ wealth.” Though this presents a significant difference between the two systems, it is evident that the differences only affect intra-system societal administration. In other words, cooperation is possible between the two systems to yield profit (which is desirable in both systems), and then each system can administer or not administer the fate of such profits wholly independent of one another. Hence, this difference should not be a limiting factor regarding the ability of the two systems to transact business.
This form of comparative analysis is useful in diluting the details that arise when examining the issue of cooperation and understanding between entities that are based on opposing systems. The distilled essence of this analysis is that though there are significant differences between the two systems in areas such as the sources of the law, the meaning of interest, the societal objectives involved, and the characteristics of the systems, the divergence is not so significant as to preclude co-existence and cooperation of the two systems in a global economy.[21]

Major Islamic banking institutions

Islamic institutions utilize various mechanisms for mobilizing funds from public, depending on the institution organisation, geographic location, market strategy, capital resources and charter. These include Islamic banks, investment companies and solidarities companies.

Islamic banks: such banks (al-massarif al islamiya) may accept Islamic current and investment accounts. Current accounts are not remunerated; clients benefit by receiving certain banking services free of charge. Investment account permits client to place funds for selected times and at designated level of risks; clients receive a range of financial services on a charge basis. Islamic investment companies: these companies offer the public the opportunity to participate in investment trusts (mudaraba) in the form of participation certificates (sukuks). The net profit is divided into the proportion of 9:1 for the certificate bearers and the company respectively. Ten public mudarbas have been launched over the last three years and have generated substantial profits. Islamic solidarity companies: these solidarity trusts (mudarabat al-takatul) offer to the public the Islamic alternative to insurance. The funds mobilized through these instruments are managed in a fashion similar to that of investment companies.

Given two basic conditions- interest free finance and equitable risk sharing – Islamic foundations may engage in number of activities, like musharaka, mudaraba, murabaha, ijarah, ijarah wa iqtina’ which we had already discussed.

The market scope governs (whether local, regional or international) governs the range of activities and types of banking practices that the Islamic institutions actually undertake. An important working rule is that the more sophisticated and internationally oriented the Islamic institutions activity, the more likely is to have to adopt or reinterpret its adherence to traditional Shariah’ principles. If on the other hand, the Islamic banks confine its activities within the local context of Islamic nature, it is more likely to adhere to the rigorous interpretation and implementation of banking activities according to Shariah’.

Even in the local context noted above, there are likely to be market conditions and practices that limit adherence. For example, profit and loss sharing is the guiding principle of Islamic banking, and project financing is the primary medium through which PLS is implemented.

There are 40 Islamic finance institutions currently in operation. Each bank has attempted to satisfy shariah requirements by dividing its operation into the various economic financing arrangements such as murabaha and mudaraba. In addition, the banks are linked to each other by a complex array of partial mutual ownership, project co- financing and Board of director membership. For example, DMI participate in joint ventures with the Faisal Islamic banks of Egypt and Sudan. The Kuwait Finance House enjoys a reciprocal depository arrangements with other financial institutions and has relationship with over 150 correspondents Banks, notably the Dubai Islamic Bank, the Bahrain Islamic bank, the Bahrain Islamic investment company and the Islamic development bank.

In addition to the presence of Islamic banks and finance institutions throughout the Middle East, part of Africa, South and South East Asia and to a very limited extent to Europe, Islamization of entire banking system has taken place in Pakistan and Iran. In such instances, all Banks, irrespective of prior pattern of operation, must correspond to the new regulations governing activities in accordance with Shariah’. The majority of the Islamic institutions were established as cooperative efforts between private businessman and governments. For example, Dubai Islamic bank is 10 percent by its private founders, 20 percent by the government of Dubai, and 10 percent by the government of Kuwait. The rest of the Equity is controlled by general shareholders.

In general, there is no great variation in the composition of Islamic banks portfolios. The main investment for most is in real estate; trade promotion and industrial product import financing forms in the next largest portfolio component.[22]

Islamic banking and its spread on world economy

The Spread of Islamic Banking

The first modern Islamic banking institutions were farmer credit unions in Pakistan in the 1950s, and the Mit Ghamr Savings Bank, a small rural institution founded in Egypt in 1963. The latter was modelled on the German local savings banks, which had impressed Ahmad al Najjar, the bank’s founder. Influential elements in Nasser’s political party, the Arab Social Union, and some of the senior managers in the country’s nationalised banks disliked al Najjar’s initiative, and the Islamic nature of the institution. In 1971, it was incorporated into a new government-controlled institution, the Nasser Social Bank, which had responsibility for the collection of zakat, the Islamic wealth tax. Many saw this new institution as a state agency rather than a bank.

The major expansion in Islamic banking came in the 1970s with the establishment of the Dubai Islamic Bank in 1975, the Faisal Islamic Banks in Egypt and the Sudan in 1977, the Kuwait Finance House the same year, the Jordan Islamic Bank in 1978 and the Bahrain Islamic Bank in 1979.[23] The impetus was partly the oil revenue boom in the Gulf and the growing economic muscle of the more conservative Muslim states of the Gulf at the expense of the more secular Arab nationalist movement. There was in any case a growing dissatisfaction with Arab socialism, especially among the young, and a feeling that there should be a greater emphasis on Islamic values in all spheres, including the economic and financial.

Current role of Islamic banking and its internalisation :

Gulf business interests strongly supported the new Islamic banking movement. Prince Mohammed bin Faisal of Saudi Arabia was the instigator of the Faisal Islamic Banks. Sheikh Saleh Kamel’s Dallah group based in Jeddah aided the Jordan Islamic Bank and funded the Albaraka Islamic Banks which spread from Turkey to Tunisia, and even to London. The al Rajhi money-changing group applied for an Islamic banking licence in Saudi Arabia, and offered Islamic financial services internationally through their London-based investment company. Prince Mohammed founded Dar al Mal al Islami, the house of Islamic funds, as an international financing institution based in Geneva.[24]

The new Islamic banks had to compete with the conventional riba-based banks in most Mu

Post from: Finance Articles

Islamic banking and global financial market: signs of sustainable growth

We’ve all heard the saying where there’s a will, there’s a way; well, how would you like to discover a bank loophole to buy foreclosed home dirt cheap? I can show you how to make money like big investors do.

There was a time when banks wouldn’t even talk to you if you didn’t have A++ credit and a substantial down payment.  Well, things have changed drastically, and you can now purchase property with less than perfect credit, with as little as 0 down.  

No, I’m not talking about those infomercials where they promise you the world and deliver information that you can retrieve from your local courthouse.  During these tough economic times, nobody has money to throw away and certainly no time to waste, so let’s get right to the important part.

-Do you want to be a successful real estate investor?
-Would you like to purchase property with little or no money down?
-Do you want the same opportunities as the real estate gurus who buy and sell hundreds of homes without spending a dime of their own money?
-Would you like to tell your boss “I quit,” and never look back as you walk out the door?
-Do you want financial freedom?

If you’ve answered “yes” to all of the above questions, you’re smart.  Who wants to work, work, work and never enjoy life?   You can get in on the best kept secret in the real estate industry – the bank loophole that no one else will reveal.  Sign up now, and get your piece of the real estate pie.

Post from: Finance Articles

Discover a Bank Loophole To Buy Foreclosed Homes Dirt Cheap

It is a fact that at one point in time or another nearly all entrepreneurs need a bank business loan, either to start up the enterprise, expend it, or to bridge difficult times when the consumer turns fickle. Of the many lenders and types of loans available, a bank business loan will probably be the best bet for starting the venture. A bank business loan is often the best way to establish and maintain your venture’s credit rating, if it is fastidiously repaid.

But, if you are experiencing financial problems, is a bank business loan a good idea to use to get current on the debts? Just what is a bank business loan and what is the application procedure? A bank business loan is an unsecured loan that does not require collateral of any kind. It is based entirely upon the credit rating of all of the involved partners; the prospectus or the plan that was developed that outlines the venture, including both the financial liabilities and the anticipated income. You will have to provide well-organized and scrupulous detail, together with a good credit rating for this type of loan. A bank business loan is the primary vehicle for starting up an enterprise and gets a venture off to a good start, however it is a poor remedy for existing financial problems.

It is far better to obtain professional advice on how to deal with your financial problems. The first thing that a qualified business debt consultant will want to know is the type of loans and financial obligations make up the entire situation. If you have unsecured debts, especially a bank business loan, there is quite a bit the consultant can do to make things easier for you to repay your business debt, continue running your venture and even improve your credit rating. One solution that may be proposed is business debt consolidation, which consolidates all of the financial obligations into one account that requires just one affordable payment per month. This has been worked out by the consultant together with all of the creditors who have agreed to accept a reduced payment that is based upon a lowered interest rate.

If the financial obligation is more problematic and either represents a large amount, or has become delinquent, the consultant may recommend business debt settlement. This form of financial relief is aimed only at unsecured loans such as a bank business loan and business debt settlement can be effected in a couple of days.

With either remedy the credit rating will begin to improve almost immediately. When creditors see that a professional business debt reorganization program is being worked out, the business credit rating reflects their approval. However, it is always best to seek help before any real damage is done and to anticipate a remedy before it is actually required. With the advice of a good business debt consultant, any venture can stay on track without taking out additional bank business loans.

Check these links to learn more:

http://www.commercialdebtcounseling.com/

http://www.commercialdebtcounseling.com/business/business-y/business-index.shtml

Lloyd Banks was on the air with FunkMaster Flex on NYC Hot 97 and did a crazy freestyle! Also watch the full interview: www.youtube.com 1st official single off his upcoming album. Beamer, Benz, or Bentley: Download here – bit.ly 2nd single: Any Girl feat. Lloyd Download on iTunes now: ning.it twitter.com www.facebook.com HFM2 (Hunger For More 2) Coming this summer (summer 2010)
Video Rating: 4 / 5

Post from: Finance Articles

Bank Business Loan – is a Bank Business Loan the Answer?

Internet has become a substantial part of our lives, therefore there is nothing surprising about the fact that almost every reputable financial institution offers internet banking services to its account holders. The more the assortment, the harder it is to make a right choice of an institution to bank with. Online banking study conducted by ComScore some time ago revealed that Wachovia online banking is one of the best internet banking platforms out there. Internet banking facility offered by the Wachovia bank (headquartered in Charlotte) landed in the top five financial institutions operating on the territory of the United States of America.

Most significant factors that affected the rankings were the facilities availed by the internet banking platform as well as the quality of provided tools, products and services. Wachovia Online Banking has numerous benefits, such as a completely user-friendly interface with a convenient layout. To log in a system an account holder just has to provide his/her username and password. If you have multiple accounts with Wachovia bank, then you will able to view and manage them in one place without logging in every time you need to switch. There is also a combined summary of all your checking, savings, credit cards and other accounts available though Wachovia Online Banking.

Such a combined summary gives you a precise image of your spending and earning making it a valuable tool in managing finances. A customer of Wachovia Online Banking can view details of transactions, payments, withdrawals, deposits, cleared checks with history kept for 90 days. Bank statements are also available online though the Wachovia Online Banking and can be downloaded to your PC. Images of cleared checks are also kept in the system and can be printed out any time you need checks’ details.

Wachovia online banking facilitates lives of its customers offering them an efficient Bill Payment service. You should just put the details of an upcoming payment and it will be proceeded automatically within couple minutes. To make sure that the payment is effected successfully, you can also track your bills online.

Online Brokerage services included into Wachovia Online Banking package allows you to launch an investment account. You can get research reports and stock quotes in real time to earn money on trading stocks. Funds held on your checking or savings account can be easily transferred to your investment account though the online route.

Most of the facilities provided by the Wachovia Online Banking platform are gratis, however some minor fees are required for specific services. Opening online banking account is easy and completely secure. Wachovia bank guarantees that in case unauthorized access to your funds occurs, the bank is liable for all the losses. Just inform operators within 2 months that you experience a problem.

Question by Katie: Banks……?
Where do banks get their money, like if their run out of money or how is the bank sure that their have enough money to lend to alot of people that are gonna start a business???

Best answer:

Answer by CHAZ2006
they get the money from depositors, the federal reserve sets the ratios that banks must have on hand for withdrawals. not all people withdraw their money at once unless there is run on the bank.

Give your answer to this question below!

Post from: Finance Articles

Wachovia Online Banking

This article looks at the way banks exploit customers with NSF and overdraft fees. It contrasts this with the alternative of using payday loans savings and proposes that these are in fact cheaper than bank fees. It goes on to show how banks lobby aggressively against the payday industry fearing cuts in there fees. The findings are based on a US study by the federal government and is freely down loadable.

An independent agency of the federal government, the FDIC was created in 1933 in response to the thousands of bank failures that occurred in the 1920s and early 1930s. The commission is managed by 5 people who constitute a board of directors. They are all appointed by the President and confirmed in the Senate. No more than three can be from he same political party.

In 2006 legislation allowed banks to apply automated overdraft programs – much to the detriment of consumers. This is a system where the bank honors customers obligations using computer rules to determine non-sufficient qualification for overdraft coverage. Data and information were gathered through a survey of a sample of institutions representing 1,171 FDIC-supervised banks, and a separate data request of customer account and transaction-level data from a smaller set of 39 institutions.

The Federal Deposit Insurance Corporation (FDIC) published the results of a two year study on the use of overdraft programs operated by FDIC-supervised banks. Astoundingly the study found that customers pay in excess of 3,500 percent APR on a NSF check – on average.Customers in low income areas were more than likely twice as certain to incur these fees.

The FDIC study reinforces the payday loan industry’s position that short-term cash advance loans are significantly less expensive than traditional bank overdraft fees. The study also found that, unlike payday loan companies that offer on-demand products, most banks (75.1 percent) automatically enrolled customers in overdraft programs that carry APRs and other fees far more expensive than the typical cash advance loan.

The study concluded that a typical customer would incur fees of $27- for each $20 overdraft over a 2 week period. A $60- ATM overdraft in 2 weeks would incur an APR of 1,067 percent. A customer repaying a $60 ATM overdraft in two weeks would incur an APR of 1,173 percent and a customer repaying a $66 check overdraft in two weeks would incur an APR of 1,067 percent. Oddly enough the faster one pays down the overdraft the higher the APR turned out to be.

Some consumer advocacy groups like the CRL are lobbying to ban payday loans. This leaves customers with no option than to pay overdraft fees to the banks. CRL and others recently led the charge to pass HB 545, a law effectively banning payday lending in Ohio . In 2006, Ken Compton, CEO of Advance America, said, “Contrary to the CRL’s spin, responsible uses of the payday product provides consumers firm footing to overcome unexpected financial circumstances”.

Some key findings;

Over 90% of banks completed overdraft fees without informing the customer.Very few banks (less than 8%) inform customers that they are about to incur insufficient funds. There is little opportunity to cancel the transaction so avoiding the fee.

Bank customers complaints about overdraft fees were received by twelve percent of banks.

Almost 9 percent of consumer accounts had at least 10 NSF transactions during a 12-month period. 4.9 percent had 20 or more NSF transactions.Clients of banks with 20 or more NSF transactions are charged $1,610 per year.

Post from: Finance Articles

UK Payday Now

If you are like me, you know very little about banking investments. You may think of investing as something you do through the stock market. While this is something that many do, this can be very risky, and may not pay off much if you don’t have a lot to invest when you start. You may find that this is something that you can not do on your own, and that means paying someone else to do it. What you should know is that there is help for you right in your own community and you don’t have to drive any further than your bank to find it.

You may not think of banking investments if you are looking for the get rich quick type of investment. Though there are many times when this can happen, you really have to get lucky for something like that to occur. The best investments for most families are the ones that slowly, yet steadily, gain through the years, and those are the banking investments that many rely on when they are trying to save for retirement, a second home, or to put their children through college. Think of investing through the bank as a more secure way to save what you earn, and to have that earn more for you.

What you will find with some of the banking investments that you can get is that some are covered by the FDIC. That means that you can be sure you will get your money back, up to the limit of coverage, should something go wrong and the bank were to fail. These accounts are not only safer, they can earn steadily through the years, though they are prone to bad times when the economy is not on an upswing. Money market accounts are usually covered as banking investments, and they are guaranteed by the FDIC. That is just one option.

You can find out more about other banking investments options from your bank by going in and asking to talk with a financial advisor. Not only can they tell you what they have to offer, they can also help you put your money in all the right accounts. At times, we may have money in one type of account when another may have more of a benefit. Savings is good, but the interest rate tends to be lower than other types of accounts. Your money should be making money, especially when the economic future seems a bit shaky at the moment.

Post from: Finance Articles

Banking Investments