Islamic finance in Kuwait

Abstract

Islamic banking is an experiment in finding innovative ways to regulate a financial system under Islamic law. In Kuwait the Kuwait Finance House has been operating for ten years as an Islamic financial institution surrounded by other institutions based on the western model. Kuwait is a particularly interesting centre for Islamic finance, as the Kuwait Finance House (Kuwait's only Islamic bank) has been one of the more profitable Islamic banks in recent years. Kuwait has benefitted greatly from the high oil revenues of the past twenty years, and its tiny size and population mean that most indigenous Kuwaitis now lead affluent lives. The Kuwait Finance House desires to help form a healthy economic climate, by using the acquired wealth wisely according to Islamic law. This study takes the reader through the principles of Islamic finance and compares its ideals to those of the western venture capitalists, who seek to improve the economic climate in the same way that an Islamic bank does. Chapters 3 and 4 deal with the Kuwaiti economy and financial system, introducing the reader to the country within which the Kuwait Finance House operates. The activities of the House are reviewed in chapters 5,6 and 7, while chapter 8 evaluates how successful the House has been since its inception in 1979. Finally the concluding chapter looks to what lies ahead for the future of Islamic banking in general and the Kuwait Finance House in particular, with special emphasis on the development of a fully-fledged venture capital industry operating within Islamic law.