ISLAMIC FINANCIAL CONTRACTING FORMS IN SAUDI ARABIA PDF
Preview ISLAMIC FINANCIAL CONTRACTING FORMS IN SAUDI ARABIA
ISLAMIC FINANCIAL CONTRACTING FORMS IN SAUDI ARABIA: LAW AND PRACTICE A thesis submitted for the degree of Doctor of Philosophy By Ali Saeed Al-Shamrani Brunel Law School Brunel University 2014 ABSTRACT The main objective of this research is to examine whether the current practices of Islamic banking and financial activities in Saudi Arabia are compatible with the principles of Shariah. This examination includes the current uses of sukuk (Islamic bonds), the models of takaful (Islamic insurance) and accepted risk transfer mechanisms in Islamic structured finance (Islamic derivatives). The second purpose is to investigate the basic laws of banking and financial activities in Saudi Arabia and examine whether they are compatible with Shariah principles. The final aim is to suggest solutions to the absence of regulatory and supervisory systems of Islamic finance in Saudi Arabia by proposing a legislative and regulatory framework for Islamic banking and finance in Saudi Arabia. The research findings show that there are no specific laws and regulations governing Islamic banking and financial activities in Saudi Arabia. In addition, there is no independent central Shariah board to regulate and supervise Islamic banking and financial activities in Saudi Arabia, nor are there are any specialised commercial courts to look into banking issues. The research finds that there are some articles in the law of supervision of cooperative insurance companies in Saudi Arabia, and its implementing regulations, which do not comply with Shariah, and in addition, there is some incompatibility between the law and its implementing regulations. The final finding is that the issuance of sukuk and Islamic financial derivatives in Saudi Arabia are not consistent with Shariah requirements, due to the absence of regulatory policies and supervisory harmonisation, while Islamic insurance needs to amend some articles of the law of supervision of cooperative insurance companies in Saudi Arabia, and its implementing regulations, in order to comply with Shariah and also to avoid incompatibility between them. I ACKNOWLEDGMENTS All the praises and thanks are due to Allah Almighty, God, who helped me to achieve this study and I ask him to bless this work. Firstly, I would like to express my gratitude to my mother, my wife, my sons and daughters, and my brothers and sisters, for their support and encouragement during my journey towards the completion of this study, and without whose constant encouragement, understanding and support the work would not have been completed. I would like also to thank Prof. Talal A Al- Malki, Vice-President for Quality & Development at Taif University for his significant support. I would also like to thank all of my friends who supported me in writing and for providing advice, as well as encouraging me to work hard to strive towards my goal. Secondly, in the course of this research, I am indebted to many academics for their guidance, encouragement, co-operation and generous assistance. In particular, I am extremely grateful to my supervisor, Dr. Olufemi Amao, for his professional advice, guidance, suggestions, encouragement, patience and invaluable assistance during the entire process as well for being very kind, warm-hearted and polite to me throughout the meticulous reading of the earlier drafts of my work. Without his help this work would never have been done. I would like also to thank my second supervisor, Prof. Holger Sutschet, for his help and support. I would like to express my thanks to Dr. Muhammad Korotana for his advice and guidance. Finally, many thanks are due to the entire faculty and administrative staff at Brunel Law School for their invaluable help and support. II DECLARATION I hereby declare that the work in this thesis is my own work and all quotations have been distinguished by quotation marks. This work has not been submitted in substance for any other degree or award at this or any other university or place of learning, nor is being submitted concurrently in candidature for any degree or other award. Ali Saeed Al-Shamrani III ABBREVIATIONS USED AAOIFI A c c o unting and Auditing Organization for Islamic Financial Institutions BCL Banking Control Law BIB Bahrain Islamic Bank BIS Bank for International Settlements BNM B ank Negara Malaysia CBA C e n tral Bank of Malaysia Act 2009 CBB C entral Bank of Bahrain CBK C entral Bank of Kuwait CMA C a pital Market Authority CML C a pital Market Law CMSA C a pital Markets and Services Act 2007 CRSD C o mmittee for the Resolution of Securities Disputes FASB F i n ancial Accounting Standards Board FSA F inancial Services Authority GCC Gulf Cooperation Council GFH Gulf Finance House GWP G r oss Written Premiums IBB I slamic Bank of Britain ICCS I s l amic Cross Currency Swap IDB I s lamic Development Bank IFA I s lamic Fiqh Academy IV IFI Islamic Financial Institution IFIs Islamic Financial Institutions IFSB Islamic Financial Services Board IIFA International Islamic Fiqh Academy IIFEF I slamic International Foundation for Economics & Finance IIFM International Islamic Financial Market IMF International Monetary Fund IPO Initial Public Offering IPRS Islamic Profit Rate Swap IRS c onventional Interest Rate Swap LIBOR L o n don Interbank Offered Rate MR M alaysian Ringgit NCB National Commercial Bank of Saudi Arabia OIC Organisation of the Islamic Conference PA Participants’ Account PB Participants’ Body PLS Profit-and-Loss Sharing SA Shareholders’ Account SABB S audi Arabia British Bank SAC S hariah Advisory Council of Bank Negara Malaysia SAC S h ariah Advisory Council SAMA S audi Arabian Monetary Agency V SB Shareholders’ Body SBs Shariah Boards SC Securities Commission Malaysia SCSAC S ecurities Commission Shariah Advisory Council SPV S pecial Purpose Vehicle SS Shariah supervisory SSAC S audi Shariah Advisory Council SSB S h a riah Supervisory Board STSL S olidarity Trust Services Limited UAE U nited Arab Emirates UK U nited Kingdom US U nited States of America USD U nited States Dollar VI GLOSSARY Al-Dayyah - substitute penalty Allah - God Aqd - contract Aqilah - the paternal relatives who used to pay the blood money in ancient pre-Islamic Arabia Ayah - verse bai - sale Bai Bithaman ajil - deferred payment sale Bai Salam - Forward Selling bai-al-dayn-bi-al-dayn - the sale of a debt for a debt bai-al-kali-bi-al-kali - the exchange of a delayed counter value for another delayed counter value bai-el-Inah - fictitious sale Bayt al Mal - treasury of the community Fard - an obligatory duty Fasid - invalid Fatwas - religious opinion concerning Islamic law Fidyah - ransom of prisoners of war Fiqh - Islamic jurisprudence Gharar - contractual ambiguity Hadith - report of the sayings or actions of the prophet Muhammed Haram - an action which is absolutely forbidden and punishable Ijara - leasing contract Ijma - consensus Ijtihad - self-exertion Istihsan - something preferable Istishab - legal presumption Istislah - public interest Istisna - order to manufacture Iwad - substitute Khiyar - option / choice khiyar al majlis - option of the contracting session VII khiyar al-shart - option by stipulation Madhhab - school of classical Islamic jurisprudence Maisir - gambling Mubah - an action which is permitted Mudarabah - Profit and Loss Sharing Mudarib - the entrepreneur Mujir - the lessor Mukruh - an action which is disapproved Murabaha - cost plus sale Musharaka - partnership or joint venture Mustahab - an action which is rewarded Mustajir - the lessee Qardh-al-hasan - benevolent or interest free loans Qiyas - analogical reasoning by Muslim judges Quran - the Holy Book of Islam Rabb-ul-mal - owner of capital Riba - interest Riba al-Fadl - exchange surplus interest Riba an-Nasia - delayed interest Sahih - valid Shariah - Islamic law Sharika al Mufawadah - full authority and obligation or universal partnership Sharika aqd - contractual partnership Sharika mulk - partnership by asset ownership Sharikah al-wujuh - partnership by creditworthiness Sharikat al-Inan - unequal partnership Sharikat al-mudaraba - labour partnership Sukuk - Islamic bonds Sunnah - the way of the Prophet Muhammed Taawun - mutual cooperation Tabaru - donation Tadawul - Saudi Stock Exchange Takaful - Islamic insurance Taqlid - the opinions of other scholars VIII Tawarruq - monetization of commodities Urban - earnest money Urf - custom Waad - unilateral Promise Wakalah - agency Wakeel - agent Zakat - obligatory almsgiving IX
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