Kuwait’s highest religious authority said that the offering of half of Boursa Kuwait to citizens and a long-awaited public subscription to Shamal Al-Zour, the company that owns and operates a major power station, breached Islamic law’s prohibition on interest, branded them ‘Haram’, reported Bloomberg.
The non-binding fatwa issued by the Ministry of Awqaf and Islamic Affairs said Boursa Kuwait trades in stocks of companies including those that do not comply with Islamic principles and makes ‘illegal revenues’ from brokering transactions in these stocks.
The ministry also said that the Kuwait Stock Exchange company earns returns on deposits at banks that are not Shari'ah compliant.
While a conservative country, in Kuwait all laws are drafted, openly debated and issued through the GCC’s only freely elected legislature.
Both public offerings are mandated by laws issued by parliament, which does not require companies to be Shari'ah-compliant.
Opposition to the share sales is building in parliament. Mohammed Al-Hayef, an Islamist lawmaker who is spearheading the campaign against the Kuwaiti IPOs, has requested to quiz Finance Minister Nayef Al-Hajraf over issues that include the offerings. Al-Hayef also alleges that transactions overseen by Al-Hajraf are not Shari'ah compliant, even though Kuwait’s constitution or current laws do not require them to be.
Both companies under subscription have foreign investors. A sale of shares in Shamal Al-Zour would be the first IPO resulting from a public-private partnership. The company is 40 per cent owned by an international consortium that includes Japan’s Sumitomo Corporation and France’s Engie.