issue no. 163 - january–march 2007 / muharram–rabi al awwal 1428

COUNTRY FOCUS: BAHRAIN
NEWHORIZON January–March 2007
We have a number of prominent
Shari’ah scholars. But we need
a new generation of specialists
who, in addition to knowledge
of the Shari’ah law, also have
a background in banking,
especially practical banking.
Abdulrahman Abdulla Al-Sayed,
Central Bank of Bahrain
why both types of banks cannot co-exist
successfully in the Kingdom of Bahrain’
states Al-Sayed. ‘We offer them equal
opportunities and provide equal treatment.’
According to him, there has been an increase
in conventional banks in the country, but
this increase ‘hasn’t been as significant as
that of their Islamic counterparts’.
There is a lot of interaction going on
between Islamic and conventional banks in
Bahrain. A large number of specialists from
the latter move to work at Islamic financial
institutions. ‘There is no Shari’ah law that
says that Islamic banks should only recruit
Muslims,’ states Al-Sayed. The staff is hired
according to the universal rule of judging
potential employees by their knowledge and
abilities, not by their faith. Conventional
bankers can ‘provide skills and experience’,
given the fact that conventional banking is
much older than Islamic banking. ‘Islamic
banking, not Islamic transactions,’
emphasises Al-Sayed. ‘Islamic transactions
have existed for over a thousand years,
but they were done on an individual basis
between individuals. So, the concept is
there to take and develop into products.’
In the course of this development (in
addition to traditional Islamic products)
the conventional banking specialists use
some conventional products as a basis and
then ‘modify them in order to make them
Shari’ah-compliant’. Al-Sayed goes on to
give an example: ‘Let’s take a credit card.
Ten years ago, everybody would say there
was no way it could be Shari’ah-compliant,
as it involves ‘selling’ cash and there is a
prohibition of direct cash financing in
Islamic banking. But Islamic banks are
very innovative and today, there is a range
of Shari’ah-compliant credit cards, based on
murabaha [the bank buys and sells the items
required by the customer], ijara [leasing]
and so on.’
Needless to say, the Bahraini Islamic banking
system is ‘booming’. In 2006, its total assets
reached $20 billion compared to just over
$10 billion two years ago. In 2006 alone,
three new Islamic banks were granted
banking licences (Al Salam Bank and United
International Bank (UIB) are amongst the
newcomers), with another two a year earlier.
‘There are more banks in the queue waiting
for the Central Bank’s approval,’ says
Abdulnasser Ali Bukamal, senior manager,
banking operations, and money laundering
reporting officer (MLRO), at Bahrain-based
Shamil Bank.
Shamil Bank of Bahrain is one of the
oldest Islamic banks in the country. It
launched Shari’ah-compliant operations
back in 1982, when it was established as an
offshore banking unit, only a few years after
Bahrain Islamic Bank was licensed. In 1994,
it obtained a commercial banking licence
and became a fully-fledged Islamic financial
institution. Today, Shamil Bank has a
shareholding equity of $353.4 million (as
of 31st December 2006), seven branches
and 14 ATMs in the country, and the holders
of the bank’s cards can use ATM facilities in
any of the GCC (Gulf Cooperation Council)
countries. It also maintains a presence
overseas (including China and Saudi
Arabia) through its associated and
affiliated companies.
The bank provides financial and investment
services for both corporate and retail
customers. Facing the competition from its
counterparts, it has expanded the range of
standard products offered by the majority of
the Islamic financial institutions. In addition
to such services as murabaha, mudarabah
(profit loss sharing), musharakah (joint
venture), ijara and istisna (contractual
agreement for manufacturing goods and
commodities), Shamil Bank has introduced
al-ruban (credit card), commodity murabaha
(personal loan, cash money) and tawaruq
(personal loan). To date, it is the only bank
in Bahrain offering al-ruban services, with
around 2000 takers so far. As for tawaruq,
it is ‘a newly developed product’ not just
for the bank, but for the Bahrain’s Islamic
financial market as a whole. ‘Now we can
fully compete with conventional banks,’
states Bukamal.
Shamil Bank’s database consists of both
Muslim and non-Muslim customers, and
Islamic banking is proving to be more and
more popular among people of non-Islamic
faith. But what is the secret of its success?
Bukamal gives his outlook: ‘When some
people approach a certain bank, it is not
done only from a religious point of view.
26 IIBI www.islamic-banking.com