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1983 | Buch

Banking and Finance in the Arab Middle East

verfasst von: Rodney Wilson

Verlag: Palgrave Macmillan UK

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Inhaltsverzeichnis

Frontmatter
1. Traditional Banking Practice
Abstract
The financial system of the Middle East dates back long before the advent of modern banking, which has only had a presence in the region for just over a century. As soon as a barter economy gives way to a monetary system, in which some type of specie is used for transactions purposes, a need for financial institutions inevitably arises. Several reasons can be advanced for this need. Firstly, unless all payments and receipts take place instantaneously, some individuals and businesses will end up with holdings of cash, precious metals, or whatever other monetary instruments are used for transactions purposes. These holdings can of course be hoarded, but this involves a security risk, and a cost if protective measures are taken to minimise the risk. However, if centralised deposit facilities are provided, the need for hoarding is reduced, as well as the costs involved. Most societies find it is more convenient, and cheaper, to have such facilities, and the individuals who historically specialised in this task were the moneylenders or the moneychangers.1
Rodney Wilson
2. Emergence of Modern Banking
Abstract
As Egypt had the earliest modern banks in the Arab Middle East, it seems appropriate to examine its financial institutions in detail, even though initially they were foreign rather than locally owned. It was in any case the rapid penetration of foreign banks which eventually resulted in moves to found indigenous institutions, whose business practices correspond to those found in the West. That Egypt should be the instigator of modern banking in the Arab Middle East is not altogether surprising, as the country boasted the largest number of educated people, had considerable commercial dealings both internally and externally, and possessed an economic and financial sophistication not found elsewhere. Despite the fact that nationalism in Egypt was strong even in the early nineteenth century, foreigners took most of the initiative in financial dealings, and there was a marked absence of local competition.1 It was only in the 1920s that a belated attempt was made to emulate European banking practices and establish a wholly indigenous institution.
Rodney Wilson
3. Growth of Arab Financial Expertise
Abstract
With the spread of education in the Arab world, especially in the first three decades of this century, many young Arabs started to enter the modern sectors of their own economies. They began to take over some of the jobs which had formerly been carried out by foreigners, either expatriates from Europe serving in the area for short stays, or more permanently resident foreign nationals, such as those living in large numbers in Beirut, Alexandria and Cairo. In the field of banking and finance many young Arabs already worked for the foreign banks represented in the Middle East even in the closing decades of the nineteenth century, but most did not rise above the lowest clerical positions, and many were employed as messengers and in other similar menial tasks. By the 1920s however this situation was changing and, although few Arabs had reached the position of branch managers in the commercial banking system, many of the jobs up to cashier level were filled by local citizens. These moves went furthest in Egypt and the Levant, as school-leavers from the foreign colleges, where many wealthy local merchants sent their families, were in heavy demand by the banks. Teaching in schools such as the American College in Cairo was entirely conducted in English, and the basic numerate and literary skills imparted were the same as those taught in western schools.1
Rodney Wilson
4. Islamic Banking in Principle and Practice
Abstract
The Koran, like the Bible, is not only concerned with spiritual matters of an abstract nature, but also with how believers should conduct their everyday lives. Unlike the Bible, however, which concentrates its temporal teaching on social relations, the Koran explicitly deals with economic questions such as the distribution of property on inheritance, hoarding, usury and the utilisation of financial resources. Mohammed was not just a prophet, but also a law maker, and the Sharia or Islamic law has to be followed by all believers. It would be incorrect to suggest of course that Christian scholars were never concerned with economic matters, since for example Thomas Aquinas and the scholastic philosophers deliberated on the notion of a just price and the morality of interest charges. Nevertheless these concerns are not given much emphasis in the Bible itself, and they are far from being central issues in modern Christian debate. In contrast the revival of interest in fundamentalism in the Muslim world has resulted in greater attention being paid to Koranic teaching and the Sharia law on economic issues. At the same time given the new financial wealth of parts of the Muslim world, it is only natural that believers are particularly interested in those parts of the Prophet’s teaching offering economic guidance, perhaps even to the exclusion of other matters.
Rodney Wilson
5. Financial Specialisation in the Gulf
Abstract
During the 1970s the focal point of Arab banking moved from Lebanon to the Gulf. There were of course two obvious reasons for this move, firstly the civil war in Lebanon, and secondly the quadrupling of oil prices in 1974 which resulted in a correspondingly increased need for financial institutions in the oil surplus Gulf states. In the late 1960s, Beirut served as an important intermediary for Arab funds from the Gulf, but even then confidence was shaken by the Intra Bank collapse, details of which are given in Chapter 3. In addition long before the civil war, many bankers doubted the prospects for long-term stability in Beirut as a financial centre, in view of the continuing uncertainty resulting from Lebanon’s close proximity to Israel and the presence of large numbers of Palestinian refugees, who virtually ran their own state within a state.
Rodney Wilson
6. The Role of Commercial Banks in Recycling
Abstract
In 1974 in the aftermath of the quadrupling of oil prices it became evident that the major oil exporters of the Arabian peninsula would emerge with substantial balance of payment surpluses. A surplus in one country of course implies a deficit in another, in this case the major Western oil importers, and to a lesser extent in absolute terms the oil importers of the developing world, including those in the Middle East itself. The problem for the international financial system was quite simply how to recycle the petro-currency earnings from those states in surplus to those in deficit. Despite the grandiose schemes proposed for collaboration between the OPEC surplus states and the OECD oil-importing countries in tackling the problem, in the end nothing was agreed, and most recycling has taken place on an ad hoc basis without any international supervision.1
Rodney Wilson
7. Aid and Development Assistance Agencies
Abstract
Despite the widespread discussions on the recycling of Middle East surplus funds to help those energy-deficient developing countries who suffer considerably as a result of oil price rises, there is little agreement about the most appropriate institutional forms to channel the funds. There are five main mechanisms to effect such transfers, both intra-regionally within the Middle East and extra-regionally to the other Third World importers. Firstly, there are private investment transfers, either through direct investment by wealthy individuals or companies from the oil exporting countries. Secondly, there is the growing volume of remittances from workers who are citizens of energy-deficient developing countries, but who work in the oil-surplus states. Thirdly, there is the recycling which is carried out by the commercial banks through international capital markets, where Third World countries are heavy borrowers, and OPEC capital is deployed, largely through the major western banks, but also increasingly through Middle Eastern-owned banks as discussed in the previous chapter. A fourth method of recycling is through bilateral state transfers, direct from the government of a petroleum exporting country to the treasury or finance ministry of the energy-deficient recipient. Finally there are the transfers through the established Middle Eastern aid agencies, upon which attention will be focused in this chapter, partly because of their increasing significance, but also owing to the interest they appear to arouse.
Rodney Wilson
Backmatter
Metadaten
Titel
Banking and Finance in the Arab Middle East
verfasst von
Rodney Wilson
Copyright-Jahr
1983
Verlag
Palgrave Macmillan UK
Electronic ISBN
978-1-349-04817-5
Print ISBN
978-1-349-04819-9
DOI
https://doi.org/10.1007/978-1-349-04817-5