RIYADH, Aug 18: Religious rulings or fatwas from various sheikhs, at times contradicting each other, with regard to Shariah compliance status of various instruments are creating confusion in Saudi financial markets, putting potential investors in a fix.
Since most business dealings in banks are using systems that do not comply with Islamic law, potential investors, seeking shariah compliant investment instruments, look for fatwas from religious clerics or at least get their opinions before investing money in stocks or banks, Al-Riyadh newspaper reported.
Most bank experts say the difficulty comes when the activities of companies and local banks are defined. Companies may get loans from foreign banks one day and the next day from an Islamic bank.
The next part of the problem was that some local sheikhs inexperienced in financial matters issue fatwas banning investment in some companies and permitting investment in other companies. This can have the effect of putting the brakes on private sector economic growth.
Some experts express apprehension that fatwas may not only hamper foreign investment to the kingdom but affect nation’s position in an increasingly competitive world. As it is today, some say that fatwas are having pronounced effects on Saudi stock prices and market activity.
Experts say if there are demands to have a committee of ulema, or scholars, within the Capital Market Authority, it may cast doubts on the legality of the financial institution. An equally daunting concern is that the national economy could be divided into legitimate and illegitimate businesses, which could lead to a black-market economy.
An example of the adverse effects fatwas can have stock business where gas and cooperative insurance companies’ shares plunged after a negative fatwa. Later, after the issuance of another contradictory fatwa, the stocks of both concerns rose significantly.
Economists say fatwas should be based on legitimate studies and be issued by those who have knowledge of the economy.
“Why do they issue fatwas on something they do not know about?” asked Abdullah Al-Maghlooth, an economics teacher at King Saud University. “We have a Shariah committee and a higher ulema committee that specialize in such cases and issue a fatwa only after intensive study. We as citizens want to invest our money in something profitable. Issuing random fatwas is not good for the economy or for individual investors. I wish those sheikhs would stop issuing such fatwas and leave it to the experts. It can be both confusing - and costly -for investors.”
“I was hesitant before entering the stock market,” said investor Khaled Al-Manie. “I was using investment portfolios. After I noticed the amazing interest of people in the stock market, I decided to enter. What confused me the most were the names of the sheikhs issuing fatwas to ban investing in that company or buying stocks in this company.”
Al-Manie said he was scared of doing something against Islam, and searched for fatwas on the Internet before investing in anything. “In the end, I had it. Now I only listen to the higher ulema committee. It is because of a random fatwa that I missed investing in cooperative insurance,” he said.