Qatar’s central bank has ordered non-Islamic banks to phase out their Islamic operations by the end of the year, according to Bloomberg.This doesn’t mean that banks will have to leave Qatar completely. Rather, their Islamic finance divisions will no longer be able to operate within the country.
The move stemmed from concerns that commercial banks were mixing up Islamic banking activities and conventional banking activities, but it is likely also about protecting local banks from international competition.
A little background on Islamic banking: It follows Sharia law, which does not allow the charging or earning of interest. The central bank first let commercial banks open Islamic Banking Units in 2005 and these now have about 100,000 customers according to Arab News.
HSBC has already approached the Qatari regulator in hopes of a solution. The big concern now must be that this perspective could spread beyond Qatar, to other Gulf countries. HSBC Amanah, which focuses on Islamic banking practices and has branches in 9 countries including Qatar, could be under threat if the sentiment was to spread.
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