The sudanese islamic banking by al siddig talha mohamed

International Conference on Islamic Banking and Finance in Mauritius The Sudanese Islamic Banking Experience By/ Prof. Al SIDDIG TALHA MOHAMED RAHMA The National Ribat University SUDAN Mauritius 5th-6th April 2011 1. Preface: Sudan, as an African Arab country, has roots in the Islamic Ideology and its pioneering in establishing Islamic Banks . Sudan is located at the Northern Eastern part of Africa on an area of about one million square miles. Sudan is the widest African and Arabian country, neighbored by nine countries. According to 2010 census, the population of Sudan is estimated as 40 million inhabitants, spread over the vast territories of one million square miles. The population annual rate of growth is estimated as 2.6%. Sudan is endowed with ample natural resources. This includes a large area of fertile agricultural land, estimated at 210 million feddans (about 84b million hectares). The river Nile flows the country from the south to the north, making easy irrigation process. The rainfall increases towards the middle and southern parts of the country, furnishing for the existing large rainfed agricultural sector, and a large pasture base with a diverse mix of animal wealth. Sudan is considered a major producer of agricultural crops. Sudan has a huge economic potential, a proposition that has repeatedly been made by various observers. This economic potentiality could be looked at in terms of arable land, grazing land, water resources, climate diversity, human resources, as well as mineral resources. Sudan origin is traced in ancient kingdoms, with a unique feature of interaction between various cross-cultural communities, including Muslim, Arab, and African communities. Yet, Islam has been a central feature of life for almost all the north. The majority of the population is located in the north. The north is mainly inhabited by Muslims, while the south is dominated by Christians. In recent history of political experience, an Islamic religious nationalist revolution lead to the Mahdist rule (1885-1898). That was followed by the condominium rule, under the British and Egyptians (1899-1956). The country realized its independence in 1956. 2- Emergence of the Sudanese Islamic Banks: The National Bank of Egypt was opened in Khartoum since the condominium period, in 1901. It obtained a privileged position as a banker to and for the government. It was followed by Barclays’ Bank, and dominated and stabilized the banking system in Sudan. A number of the branches of foreign banks were operating in order to look after the group of foreign traders from Egypt, England, and other countries before independence of Sudan. After Sudan obtained its independence, the national Sudanese government issued the Act of the Sudan Bank, which then became one of the first operational Central Bank institutions in Africa. All of the responsibilities of the National Bank of Egypt were then moved to this new institution. Other three national Sudanese banks started operation, beside the agricultural bank of Sudan and the Industrial Bank of Sudan. An active Islamic movement emerged in Sudan. Its good contacts with other Islamic movements stood before Islamization progress in Sudan, and the views and culture of the whole Islamic momentum. In 1968, Omdurman Islamic University established the first Islamic department of economics. Dr. Ahmed Al Nagar, the pioneer of the first Islamic Bank in Egypt in 1963, was responsible for this department. He also started to establish a similar model in Sudan, later called the Sudanese Saving Bank, with the same idea of the one which was closed by the Egyptian government. According to book of English Series (5)of faisal Islamic Bank of Sudan ((In February 1976 H,R,H. Prince Mohamed Al Faisal Al Saoud held discussion with President In 1977, Prince Mohamed Al Faisal Aal Saud called the Sudan government to open an Islamic bank in Sudan. The executive and legislative authorities in Sudan, at all levels, strongly encouraged the idea. In August 1977, Faisal Islamic Bank (F.I.B.) was registered as a limited public company under the Sudanese Company Act of 1925. The bank was granted tax and custom exemptions. The Bank received a rush of shareholders, and issued shares that increased the share capital of the bank from 6 million Sudanese pounds to 10 million Sudanese pounds within the subscription period. This warm public reception paved the way for unprecedented success of the bank. The bank has proved that the Islamic banking format can provide all banking services at a very high level of skill and competence. This rush for the services of F.I.B. pushed the bank administration to speed up expansion of the bank services horizontally as well as vertically. The bank opened a lot of branches in different locations in Sudan. At the same time, the bank established several affiliated companies for trade and services. That included the Islamic Insurance Company (the first Islamic insurance company in the world), the Real Estate Company, and the Islamic Exchange Company. That was in addition to the department of Zakah. (This department was the origin of the idea behind establishing the Camper of Zakah in the country). F.I.B made a great effort to obtain Halal (permissible) profit, abiding by the Shariah rules which were applied under the supervision of Shariah Supervisory Board. This Board is composed of well-known scholars who are wholly responsible for ensuring that the bank’s operations are free of any elements which are contrary to Shariah. The Shariah Supervisory Board (S.S.B.) reviews the bank’s operations to make sure that they are in conformity with Shariah rules and to rid them of any element of Riba. The S.S.B. also participates with authorities of the bank in drawing up standard contracts and agreements to cover all types of operations and transactions carried out by the bank. The S.S.B. also reviews the contracts actually signed with the bank’s clients. The S.S.B. may also give an opinion on future operations to be carried out by the bank to ensure strict adherence to shariah.The board also trained workers by organizing many training programs . According to the statement by the chairman of the board of directors in addressing the 31st meeting of the general assembly of shareholders held on march 2010, His Highness Prince Mohamed Al-Faisal Aal Saud, the process ensured the development of the bank and fulfillment of the requirements of the Central Bank):- ,[object Object]

In response to the requirements of the Central Bank of Sudan, the bank fulfilled the restructuring program by increasing its capital to 110 Million Pound by 31/12/2009.

In compliance with the requirements of Central Bank of Sudan, and coping with international development in the sphere of Risk Management, the bank established a Risk Management Department and took appropriate measures to ensure propagation to the best practices .

Further, the bank continued to intensify external relations with foreign banks and financial institutions.

The bank utilized modern technological devices extended to customer in all sectors, strictly adhering to high professional standards and using highly advanced information technology.

The bank also participated to relief to the poor, disabled, and sick people and other categories of needy people in the society, through a program of special solidarity and humanitarian donations.

Financial support extended by the bank covered health services as well as a wide range of social and cultural institutions, including universities, educational projects, mosques, Quran schools, and sport clubs.The success of this experiment resulted in establishing other Islamic banks in Sudan, including: ,[object Object]

The Sudanese Islamic Bank -------------1982

The Western Sudan Islamic Bank ------1983

The North Islamic Bank ------------------1983

Al-Barka Bank -----------------------------1984

Co-operative Development Bank .-------1984These new Islamic banks add a new culture of banking and finance in Sudan. They deal with new modes of investment, such as Mudarba, Musharka, … etc. The success of F.I.B. and other new banks aroused the interest of other competing local riba–oriented banks, to study and evaluate this experience closely . The movement of Islamic banking in Sudan progressed faster, and the government ordered the three specialized banks (Real Estate Bank, Agricultural Bank, and the Industrial Bank) to adopt Islamic Windows. The Islamic banking in the Sudan has drawn a very large number of shareholders from the Arab World. Some of these shareholders were behind the establishment of Islamic Banks throughout the Muslim World (Kuwait, Turkey, Bangladesh, Pakistan, Bahrain, … etc) The example of the pioneering Sudanese experience gave immense encouragement to others in the Muslim World to establish their own banks. Delegates from Malaysia, West Africa, Turkey and other countries were sent between 1979 and 1983 to study the Sudanese experience of Faisal Islamic bank and other Islamic banks in Sudan, with a view of applying these new models. IN September 1983, the government issued a Judicial Act to change all the country laws and insure their compliance with Islamic Shariah. At the same time, the Code of Civil Procedures and Civil Transaction Act (1983) was passed. Then the Central Bank of Sudan directed all the banks of the country to immediately start operating the Islamic banking system. This circular included :- ,[object Object]

Immediate prohibition of the interest rate, starting from the date of issue of the circular.

Immediate change of the credit facilities granted under the rate of interest system to appropriate Islamic modes of finance after obtaining the consent of the customer or liquidate of those facilities if no agreement was reached with the customer.

As regards to dealing with foreign (external) entities, the normal rate of interest system was allowed to continue until a new agreement is reached with correspondents. This was (Fatwa) interpretation based upon the Shariah principles ((Necessity Allows Prohibited Acts )). In this period where the decision for Islamization was in hurry, the staff of the different areas of economic and banking institutions were not ready, and where the transitional change needed a lot of time, the replacement of Islamic law immediately and without intensive study and training programs, a lot of weaknesses in the application were inevitable. However, later those problems were solved occasionally by the pass of time. The Recent Stage (1989-2010): Full conversion of the banking system in the whole of the country to Islamic System This is the most prominent stage in implementing the Islamic banking system in Sudan. The new banking law was passed, obliging the Central Bank to operate according to Shariah. The C.B. of Sudan issued a directive circular to all the commercial banks in the country announcing the stopping of all domestic interest-bearing transactions between individuals, public or privet entities, resident or not residents. At this stage the government issued two important procedures:- ,[object Object]

Establishing the High Shariah board for the banking system and Financial Institutions.

Revision of all laws pertaining to banking through Islamic model. A number of committees were formed to:- ,[object Object]

The Sale of Mortgage Property Act (1990).

The Banking Businesses Regulation Act (1991).

Financial Institutions that support the Islamic Banking System:

The sudanese islamic banking by al siddig talha mohamed

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The sudanese islamic banking by al siddig talha mohamed