SANAA - As the political and security turmoil is aggravating the economic woes of millions of people in the poor Arab country, economists believe that Islamic banking is the ideal solution to pull Yemen back from its crisis and reinvigorate its crumbling economy.
The increased demand for Islamic banking services and products, such as speculation, trade credit, trading and leasing, stimulated the rapid growth of the sector, Mohamed Al-Farhan, a Saudi Arabia-based economic analyst, told OnIslam.net.
This sector is unique in terms of its accounting systems because its revenue accounting, project evaluation, and partnership and speculation methods differ radically from the traditional accounting methods used worldwide.
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Yemen is on the verge of bankruptcy after a year of mass protests that forced long-standing president Ali Abdullah Saleh to step down in February.
The unemployment rate has shot above 50 percent in a country where some 42 percent of the population of 24 million live on less than $2 a day.
Government officials say the poor Arab Peninsula country is likely to run a $2.5 billion budget deficit this year.
Modest oil and gas exports, which were a vital source of foreign exchange for the government, have been hit by repeated attacks by tribesmen on pipelines since the unrest started last year.
Hydrocarbons typically account for 60-70 percent of Yemen's income and the country is losing $15 million a day as a result of the attacks, authorities have said.
The International Monetary Fund (IMF) predicts the Yemeni economy will shrink by 0.9 percent this year.
Economists opine that Islamic banking could be the key to get Yemen out of its economic crisis and put it back at the heart of the Peninsula in terms of prospects and growth.
Yemen is a rich country that has the proper tools to thrive, Ahmed al-Sharjabi a professor of Economics in Taiz, told OnIslam.net.
Not only do we benefit from untapped natural resources but our geographical position is perfect to run trades and offer investors practical services, might it be in the banking sector or others.
Sharjabi opines that Islamic finance would allow the government to get out debts fast while still respecting the country's Islamic traditions.
He also says that the Yemeni government was already looking into modifying legislation to allow more financial products to flourish in Yemen and lure investors to boost the economy.
Last year, Yemen's central bank introduced Islamic sukuk to finance state-run projects.
Muslim scholars believe that Shari`ah-compliant financial systems are the ideal solution to the country's problems.
While the government needs to finds ways to get Yemen out of poverty it is important to respect Islam and stay within its boundaries, Imam Abdullah al-Kadi, from Taiz, told OnIslam.net.
Islamic banking is the ideal solution as it proves that our traditions are on keeping with our needs and that God provisioned for everything.
It is of prime importance to distance ourselves from western financial values as they are flawed and have proven to be dysfunctional.
Islam forbids Muslims from usury, receiving or paying interest on loans.
Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.
Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.
Investors have a right to know how their funds are being used, and the sector is overseen by dedicated supervisory boards as well as the usual national regulatory authorities.
The Shari`ah-compliant system is now being practiced in 50 countries worldwide, making it one of the fastest growing sectors in the global financial industry.
Currently, there are nearly 300 Islamic banks and financial institutions worldwide whose assets amounting to $1.6 trillion (1.2 trillion euros).
Investors and individuals realize that the capitalist banking system was not only flawed but led to criminal abuse, Professor Henry Wilson from the University of London told OnIslam.net.
They are looking for more dignified way shall we say to make money. Islamic banking offers exactly that, a moral, sensible way to turn a profit.Moreover, the Islamic financial system proved to be resilient to even the harshest economic environment and this is something investors found attractive.
Reproduced with permission from OnIslam.net