Islamic banks in Kuwait are subject, in terms of Shari’a control over the bank’s business, to the Shari’a Supervisory Board, which is formed within each Islamic bank to monitor the extent to which the bank’s business is in line with the provisions of Islamic Shari’a.
Islamic banking concept
They are the banks that provide banking services of all kinds in accordance with the provisions of Islamic Sharia. They accept deposits of all kinds, whether they are in the form of current accounts, savings accounts, or investment accounts for specific or unspecified terms and goals. It carries out direct investment operations, whether for its own account, for the account of others, or jointly with others, in addition to practicing financing operations for its various terms, using the formulas of Sharia contracts.
Establishment of an Islamic Bank in Kuwait
Kuwaiti banks registered in the Banks Register may establish subsidiary companies that engage in the activity of Islamic banks. A single bank shall have the right to establish one company and it shall have only one headquarters, and the capital of this company shall not be less than fifteen million Kuwaiti dinars. None of these banks may sell or transfer the ownership of its subsidiary company or part of it to any other party.
Applications for establishing an Islamic bank shall be submitted to the Board of Directors of the Central Bank for approval or rejection, and the following documents shall be attached to them:
- A statement of the founders’ names, nationalities, addresses and the share of each of them in the capital
- Feasibility study for establishing a bank
- Draft Memorandum of Association and Articles of Association of the Islamic Bank
Islamic bank registration
The registration of the Islamic bank in Kuwait shall be by a decision of the Minister of Finance in a special register of Islamic banks at the Central Bank, based on an application submitted to the Central Bank in accordance with the form prepared for this, and on the recommendation of the Board of Directors of the Central Bank.
- That the Islamic bank take the form of a joint stock company whose shares are offered for public subscription, and branches of foreign Islamic banks may be exempted from this when they are allowed to establish branches in Kuwait
- That the central bank approves the bank’s articles of incorporation and articles of association
Islamic banks direct their activities
Islamic banks may not start their work except after their registration, and they may not establish branches inside or outside except after obtaining a prior approval from the Central Bank, and these branches are registered in the Islamic Banks Register.
Branches of foreign Islamic banks and the procedures for their establishment
Within the rule of a single bank, there shall be branches of any foreign Islamic bank operating in the State of Kuwait, and the capital allocated to it shall not be less than fifteen million Kuwaiti dinars. The branches of foreign Islamic banks may not transfer the license granted to them to any other party. The Central Bank of Kuwait may set the foundations and controls regulating the activities of branches of foreign Islamic banks that are allowed to operate in the State of Kuwait.
Request to establish branches of foreign Islamic banks
Applications for the establishment of foreign Islamic banks shall be submitted to the Central Bank of Kuwait, for approval by acceptance or rejection regarding the request to establish a foreign Islamic bank branch, and the following documents shall be attached to them:
- Memorandum of Association and Articles of Association of the applicant bank
- Economic feasibility study for establishing the branch
- Evidence that the head office of the foreign Islamic bank is subject to the supervision of the supervisory authority of the country in which this center is located, and its approval to establish the required branch
Conditions for registering branches of foreign Islamic banks
- That the head office of the foreign bank submits an undertaking that it will comply with any rights owed to depositors and creditors and all obligations that may be owed by the Islamic branch
- Submit evidence indicating the transfer of the minimum value of the money allocated to conduct the activity of the Islamic branch in the State of Kuwait
Shari’a supervision over the work of Islamic banks
An independent committee is formed in every Islamic bank called the Sharia Supervisory Board, in order to supervise the Shariah over the bank’s business. The number of its members is not less than three members appointed by the bank’s general assembly. The existence of this body, the method of its formation, its competence and the method and practice of its work must be stipulated in the bank’s articles of incorporation and articles of association.
In the event of a dispute between the members of the Shariah Supervisory Board regarding the Sharia ruling, the Board of Directors of the Islamic Bank may refer this dispute to the Fatwa Board of the Ministry of Endowments and Islamic Affairs, where it is considered the final reference.
The authority shall submit an annual report to the general assembly of the bank, including its opinion on the extent to which the bank’s activities comply with the provisions of Islamic Sharia.
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