Reconciling western financial institutions with Islamic principles: reforming the Saudi financial system. (Ph.D. Dissertation)

This dissertation argues that conflicts between Islamic beliefs and Western banking practices are not necessary if financial institutions are created that correspond with the institutional structure of Saudi society. There are low levels of participation in the Saudi banking system because of the interest-based nature of most banking institutions. The Saudi banking system has a much higher share of bank deposits in non-interest (demand) deposits when compared to both advanced and developing countries. The contribution of banks to the economy is relatively low compared to international norms. This dissertation examines some Western financial institutions that are based on equity participation, including Community Development Banking, Mutual Funds, Venture Capital, and Narrow Banks. Saudi Arabia should develop a modern financial system that is consistent with Islamic principles, thereby attracting investors to accelerate development and economic growth.