Islamic banking has the same purpose as conventional banking except that it operates in accordance with the rules of shariah. Islamic Banks operate on Islamic principles of profit and loss sharing and other approved modes of Investment. It strictly avoids interest which is the root of all exploitation and is responsible for large scale inflation and unemployment. An Islamic Bank is committed to do away with disparity and establish justice in the economy, trade, commerce and industry; build socio-economic infrastructure and create employment opportunities.
According to Ali Al-Wafi, a Yemeni economist, with 20 years experience in economics, especially on the economy of Yemen, "the Islamic Banks in Yemen are suffering as a result of poor management and the general status in country, and have been unable to achieve their commitments."
The Islamic banks in Yemen were established, ten years ago, to achieve the same commitments as any Islamic bank and especially to attract capital from people, to be used mainly for investing in productive and service projects. Most importantly, the role envisaged for the Islamic Banks, was to make capital available for economic, productive business, on basis of Islamic principles, to link people with the labor market and create employment opportunities. However, the banks have failed to achieve this.
Though the banks have been successful in attracting capital, the success can be more attributed to the preference of the Yemenis for Islamic Banks over the conventional banks, rather than an achievement on the part of the banks.
"Unfortunately, in spite of attracting capital, the Islamic banks in Yemen could not manage the capital collected efficiently." says Al Wafi, explaining that, "the main problem of capital management, restricting the performance of Islamic banks in Yemen, is that administrations of these banks monopolize the use of the capital and divert it for investing only in the businesses of certain privileged segments of the society."
This is against the principles of Islamic Banking, according to which, the capital collected should not benefit only a handful and must be utilized for investing in businesses of anyone in the country. Also it is necessary for a major part of the capital to be used for investment and creation of employment opportunities, which is not the case.
In measuring the level of compliance of the Yemeni Islamic Banks with the Islamic principles of banking, the economist said that the success of the Islamic banks in Yemen in this regard differs from one bank to another and mostly they comply for reasons of "fear of Allah",, but at the same time Al Wafi indicated that there are banks who fail to comply.
Islamic banks in Yemen still on the onset of investing businesses
"Although more than ten years have passed since the establishment of Islamic banking in Yemen, the Islamic banks in Yemen have just begun to employ the capital collected, in economic and productive businesses, on the basis of profit and loss sharing" said Al-Wafi.
Recently, the Saba Islamic Bank, one of the leading Islamic banks in Yemen announced its investment in constructing residential cities in Sana'a and Aden."The bank is successfully investing in real estate, and from the very onset, the bank has been committed to employ its resources to serve the economic and social development of the country," said Jameel Al-Ansi, the General Manager of Saba Islamic Bank.
"The bank has recently launched five more residential cities in Sana'a that follow the highest architecture and engineering standards," he added. According to Al-Ansi, there will be around 4,000 residences constructed in Aden, as well.
Investing in construction of residential cities seems to be good as far as boosting up the assets these banks is concerned. According to Al-Anisi "Funding new residences and residential cities contributed to the increasing of the bank's assets, in the banking sector, from 1.7 percent in 1998 to 9.3 percent in 2009.
Islamic banks in Yemen reluctant to media
To enrich the report of Islamic banks in Yemen and to know more about their future strategy and what obstacles they face, the Yemen Times visited administrations of the Al-Tadhamon International Islamic Bank and the Saba Islamic bank and faxed them to answer the questions of the report, but they kept making appointments without use.
By Ali Saeed
© Yemen Times 2010
