Nigeria’s 10 million potential Islamic banking customers are one of the reasons why Sterling Bank is overhauling its operations to lay the foundations for a digital stand-alone Islamic brand.
Sterling Bank has received approval from the Central Bank of Nigeria (CBN) to restructure itself as a holding company in order to facilitate its plan to spin off its Islamic banking window launched in 2014. The bank’s plan to restructure stemmed from the need to take full advantage of the business it had built over the years in Islamic finance.
“While the business has been very successful with over 100,000 customers and contributes more than 10% of the profit of the bank, it unfortunately has been unable to establish itself as a brand because it is very difficult to have an authentic brand within a brand especially when the brand interest may conflict,” Abubakar Suleiman, CEO of Sterling Bank, tells IFN Fintech.
IFN has learned that the new bank, to be called Alternative Bank, has started the building process with the technology infrastructure in place and is currently looking at its own strategic focus. To some extent, the banking itself has started and what is left is the formal infrastructure to support establishing the brand in the market and be more focused in its core values.
In the upcoming weeks, Alternative Bank will be marketed as a fully digital bank called Alt Bank, together with an investment platform called Alt Invest, targeting existing customers and also to potentially bring in new customers.
Taking note of the financing gap at the sovereign and sub-sovereign levels with limited tools for financing especially for financing long-term infrastructure, Sterling Bank is looking to actively bring in Sukuk which currently exist mostly at the level of the federal government.
“We think that we are able to actively take our business model to Nigerian corporates as an alternative financing to the issuance of bonds and long-term loans that they are currently using,” Abubakar says.
The new bank has more than 10 contracts in place covering all the major areas of financing that exist such as Sukuk, Ijarah and Murabahah, among others. Within those contracts, the product offerings will be determined by the responses the bank receives from the market.
Upon receiving the first significant approval in principle from the CBN, Sterling Bank proceeded with the restructuring process while what remains to be done is compliance, as well as operating and meeting the terms of the approval in principle. The restructuring of Sterling Bank is estimated to be completed in 12 months.
“The moment we complete the restructuring, the Islamic window will cease to exist. What we will have will be a national commercial bank which will be in direct competition with Jaiz Bank and Taj Bank. As for the national license, it allows us to do business in the 36 states of Nigeria,” Abubakar explains.
The restructuring comes with a set of perks for the bank. It allows Sterling Bank to communicate directly with millions of potential customers they would serve and it also allows the bank to widen its partnerships.
“We also have other products such as the AltPower, which is specifically targeted at providing renewable energy alternatives to homes and small businesses. In essence, we are very asset-focused and are looking for areas where there is an effective demand and where the market has not been able to provide for,” Abubakar says. .