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WEEKLY NEWSLETTER
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Sudan
Index
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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