Islamic financial instruments to be used soon by Islamic banks in Yemen

Islamic banking improves dramatically

The Central Bank of Yemen (CBY) is working on preparations to implement Islamic financial instruments which will help Islamic banks in opening a window to use their liquidity surplus as well as provide funds to finance social and economic projects in Yemen, the Governor of the Central Bank of Yemen, Ahmed al-Smawi said.

He delivered a speech at the Fourth Conference of Islamic banks and financial institutions, which was hosted in the Syrian capital, Damascus, during 1st and 2nd of June.

Al-Smawi, confirmed that Islamic banking in Yemen has expanded dramatically, especially after the amendment of the law of Islamic banks.

Al-Smawi pointed to the amendment, which removed the limits on the participation of Arab and foreign to Islamic banks in Yemen as well as allowed for conventional banks to open branches in accordance with the Islamic banking system.

Islamic banks in Yemen achieved growth rates exceeding that of the world growth rate, which is estimated at 10-15 percent in terms of the volume of assets and deposits, al-Smawi said.

Al-Smawi clarified that, "Despite the recent establishment of Islamic banks in Yemen, their branches in governorates throughout Yemen exceeded 44. These banks also account for more than 30 percent of the total assets in the banking sector, and 27 percent of the total deposits.”

He said, "The financial facilities and loans provided by Islamic banks accounted for 40 percent of the total facilities and funding for the whole banking sector. These loans were mostly allocated for small and microfinance projects.”

He said that property rights in Islamic banks formed 35 percent of the total property rights of the banking sector until the end of 2008.

Al-Smawi pointed to the effects of the global financial crisis, resulting in catastrophic repercussions and consequences of financial panic such as the following: the withdrawal of deposits, and the bankruptcy of many banks and financial institutions that were classified at the top of the financial pyramid. He said that those negative effects led to a lack of liquidity and the elimination of thousands of workers, which has proved that Islamic banking is successful in such times, as it has been largely unaffected.

Link: http://www.yobserver.com/business-and-economy/10016562.html