Islamic banks to operate in Syria before year end
Syria, Economics, 3/27/2006

Only two years after private sector banks were allowed into the market, Syria is expected to see the arrival of a number of Islamic banks. Al Shall, Dallah al-Baraka and Qatar International Islamic Bank are the front runners.

The current year will witness the opening of the first private insurance companies and the first Islamic banks in Syria, according to Mohammad Hussein, Minister of Finance. Hussein was talking during a two-day banking conference held in Damascus and which focused this year on Islamic banking.

Islamic Banks have been officially allowed in Syria since May of last year, when a Presidential Decree allowed the operation of Islamic Banks in the country. Islamic banks are subject to the legal forms and measures incorporated in Law No. 28 that allowed the establishment of private banks in the country.

A major difference that will apply to Islamic banks is the fact that the minimum capital required has been set at SYP 5 billion (around USD 100 million), instead of SYP 1.5 billion for non-Islamic banks, although only half of the capital will have to be paid at the establishment of the bank while the balance will be paid within three years following its set-up. The difference in capital requirements was justified by those asserting that Islamic banks are exposed to greater risks as they engage in commercial activities.

Islamic Banks in Syria will have to conform with Muslim Sharia (law). The basic principle of Islamic banking is the sharing of profit and loss and the prohibition of interest. Islamic banking is also restricted to Islamic-acceptable deals, which exclude e.g. alcohols, pork, gambling etc.

During the conference, Al Shall Consulting and Investment Company, a Kuwaiti investment firm announced that it had applied to setup a USD 100 million Islamic bank in Syria, including USD 50 million in paid up capital.

A majority of 51 percent of the shares of the bank, to be named Al Sham Bank, would be owned by Syrian investors while 49 percent would go to Al Shall and its other partners from the Gulf. These partners include the Investment Dar Company, also from Kuwait and the Islamic Development Bank, based in Saudi Arabia.

The two front runners to open Islamic banks were long believed to be a project from Dallah al-Baraka, the Saudi conglomerate and another from Qatar International Islamic Bank.

In the same conference, Hussein announced that state banks would be allowed to launch joint-ventures with private sector Islamic banks and also open branches specifically dedicated to offer Islamic services. The Real Estate Bank is among public sector banks that have shown a desire to offer such services.

It is difficult to assess yet the growth potential of Islamic banks in Syria, although most experts reckon that with an almost virgin market and the growing conservatism of Syrian society, the opportunities should be very important. Many Syrian investors have refused until now to own shares in any of the banks that have started operating in Syria on religious grounds.

As of now, private banks already established in Syria have grown at a rate higher than expected by most industry analysts. The total amount of deposits in private banks is currently estimated at around SYP 100 billion, only two years after their launch.

Previous Stories:
  First Conference of Islamic Banks and Financial Institutions Opens in Damascus   (3/15/2006)
  Islamic banks open in Syria during 2006   (1/27/2006)
  Conference on latest developments of banking sector in Syria   (6/28/2005)

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