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Sudan
Islamic Banking
The Faisal Islamic Bank, whose principal patron was the Saudi
prince, Muhammad ibn Faisal Al Saud, was officially established
in Sudan in 1977 by the Faisal Islamic Bank Act. The "open door"
policy enabled Saudi Arabia, which had a huge surplus after the
1973 Organization of Petroleum Exporting Countries (OPEC) increases
in the price of petroleum, to invest in Sudan. Members of the
Muslim Brotherhood and its political arm, the National Islamic
Front, played a prominent role on the board of directors of the
Faisal Islamic Bank, thus strengthening the bank's position in
Sudan. Other Islamic banks followed. As a consequence, both the
Ansar and Khatmiyyah religious groups and their political parties,
the Umma and the Democratic Unionist Party, formed their own Islamic
banks.
The Faisal Islamic Bank enjoyed privileges denied other commercial
banks (full tax exemption on assets, profits, wages, and pensions),
as well as guarantees against confiscation or nationalization.
Moreover, these privileges came under Nimeiri's protection from
1983 onward as he became committed to applying Islamic doctrine
to all aspects of Sudanese life. The theory of Islamic banking
is derived from the Quran and the Prophet Muhammad's exhortations
against exploitation and the unjust acquisition of wealth, defined
as riba, or, in common usage, interest or usury. Profit
and trade are encouraged and provide the foundation for Islamic
banking. The prohibitions against interest are founded on the
Islamic concept of property that results from an individual's
creative labor or from exchange of goods or property. Interest
on money loaned falls within neither of these two concepts and
is thus unjustified.
To resolve this dilemma from a legal and religious point of view,
Islamic banking employs common terms: musharakah or partnership
for production; mudharabah or silent partnership when
one party provides the capital, the other the labor; and murabbahah
or deferred payment on purchases, similar in practice to an overdraft
and the most preferred Islamic banking arrangement in Sudan. To
resolve the prohibition on interest, an interest-bearing overdraft
would be changed to a murabbahah contract. The fundamental
difference between Islamic and traditional banking systems is
that in an Islamic system deposits are regarded as shares, which
does not guarantee their nominal value. The appeal of the Islamic
banks, as well as government support and patronage, enabled these
institutions to acquire an estimated 20 percent of Sudanese deposits.
Politically, the popularity and wealth of Islamic banks have provided
a financial basis for funding and promoting Islamic policies in
government.
Data as of June 1991
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