The Islamic Finance Handbook: A Practitioner's Guide to the Global Markets

Chapter 16KuwaitProgress and Outlook

Issam Al Tawari

Chairman and Managing Director, Rasameel Structured Finance Company

The Islamic finance industry in Kuwait dates back to 1977, when the Kuwait Finance House was established as the first Islamic bank in Kuwait. Since then, many banks and financial institutions have followed suit to retain a share in the Islamic finance market. In the 1990s, several investment and financing companies operating under the principles of Shari'ah were established in Kuwait, and in 2003 the Central Bank of Kuwait issued the Islamic banking law (Law No. 30 of 2003), which brought the Kuwait Finance House under the purview of the Central Bank of Kuwait. This opened the door for other Islamic banks to establish a presence, and in 2005, Boubyan Bank was established as the second Islamic bank in Kuwait.

Subsequently, two conventional Kuwaiti banks (Bank of Kuwait and the Middle East and Kuwait Real Estate Bank) converted from conventional to Islamic banks to tap into the growing demand for Islamic finance. In terms of investment and financing companies, the market also witnessed significant growth in the number of investment and financing companies operating under Shari'ah principles.

In terms of Islamic financing products, Islamic finance companies in Kuwait provide financing through murabahah, ijarah, and istisna contracts. There are currently no regulations governing the issuance of sukuk in Kuwait, although some Kuwaiti companies have issued sukuk ...