Articles

An interview with Dawood Taylor, Assistant General Manager and Head of Takaful Ta'awuni at Bank Al-Jazira in Jeddah.

It can be argued that the foundational principles of Islamic economics do not conflict with free enterprise and do not oppose fair gain as a principle for wealth distribution. The wealth distribution in Saudi Arabia came into being out of a number of situations unique to that land. These situations are: 1. The country's relatively short experience as a sovereign state and the great pool of resources held in the hands of the state; 2. The prevalence in the kingdom of the Wahabi school of Islamic thought, a school that can be deemed highly individualistic and highly orthodox; 3.

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The Malaysian sukuk market dominated by sale/debt based sukuk has experienced phenomenal growth ever since its inception. However, it has also raised many controversial issues. A financial product's claim of being sharia compliant cannot be accepted unless it is shown to be in consonance with the objectives of sharia.

Since 1966, the Saudi Arabian Monetary Agency (SAMA) has regulated all banking activities in the Kingdom of Saudi Arabia. The banking control law, under which SAMA was authorized, defines what is meant by banking, and it regulates the organization and operation of banks. It also dictates deposit and liquidity ratios through SAMA. A certain percentage of any bank's deposit obligation must be deposited with SAMA. The law establishes a cap on deposit obligations, and it limits banks from engaging in certain types of activities, such as trade.

Saudi judicial decisions are highly unpredictable because Saudi law is not codified and judges are not bound by precedent. Only Saudi nationals can legally own real property in Saudi Arabia, unless a special license for certain activities is authorized by the Saudi government. A mortgage may be registered over such a foreign-owned property.

Possessory interest (a pledge) is the basic security device recognized in Saudi Arabia, though it is limited and sometimes impractical. With few means to secure extensions of credit, the lease of tangible personal property is being investigated as a financial instrument. If lease financing is a lawful banking activity, then the application of Saudi income tax laws should be reviewed. If the uncertainty of the tax treatment of lease payments is too great a business risk, then an alternative, income-tax free method could be adopted.

The Islamic Commission for Economic, Cultural, and Social Affairs emphasized the necessity of international negotiations within the United Nations to reorganize the structure of the world economy. The Commission reviewed the economic situation of developed OIC states, the recommendations of the Islamic Ministerial Conference on Agricultural and Food Security, and the activities of the Islamic Development Bank.

Having seen Saudi Arabia as an economy enjoying much growth and one set in a fairly calm social and political framework, it must be understood that the Islamic growth model is not an inadequate one. It might even be said that this outlook on development has promoted growth and has led to greater flourishing. Islamic thinkers hold that the Islamic economic system is more consistent than the capitalist and socialist approaches. In the Saudi kingdom, the rulers have been sensible to set up institutions that enhance the lives of the people.

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