Islamic Banks in the GCC Countries: Current Practice

Abstract

Abstract : The purpose of this academic study is to demonstrate the practical implementation of the concept of Islamic banks in the GCC countries. Many theoretical studies on Islamic banks have been conducted, but few of them deal with the actual implementation of the concept of Islamic banks. It is hoped that this research will highlight the applied aspects of Islamic banks in the GCC countries. The sample taken in the study included three banks: KFH, BIB, and QIB. The methodology used in this research is a case study because it enables the researcher to gather information in different ways, whether through interviews, observations, or document review. The research illustrated the applied aspects in the following spheres: deposits, financing, investment, social role, and the difficulties and obstacles facing Islamic banks. Finally, the financial performance of these banks was analyzed using the financial ratios in comparison with the conventional banks operating in each bank's respective country The findings of this study show that the three banks are similar in some aspects and dissimilar in others. These banks are similar in the methods used to calculate the return on deposit accounts and the profit sharing ratio in financing. However, they differ from each other in financing, deposits, the sole role they play, and the difficulties and obstacles each faces. The financial analysis of these banks achieved growth rates exceeding those of other traditional banks during the study period 1983 until 1992. They also made good profitability levels and competed favorably with the conventional banks despite their new experiment and the limited size of these banks.