Identifier
Created
Classification
Origin
09KUWAIT1002
2009-10-19 12:58:00
CONFIDENTIAL
Embassy Kuwait
Cable title:
NEW PUBLICLY-OWNED BANK "WARBA" WILL GIVE CITIZENS
how-toVZCZCXRO3464 RR RUEHDE RUEHDH RUEHDIR DE RUEHKU #1002 2921258 ZNY CCCCC ZZH R 191258Z OCT 09 FM AMEMBASSY KUWAIT TO RUEHC/SECSTATE WASHDC 4078 INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE RUEATRS/DEPT OF TREASURY WASHDC
C O N F I D E N T I A L KUWAIT 001002
SIPDIS
STATE PASS FEDERAL RESERVE
E.O. 12958: DECL: 10/18/2019
TAGS: EFIN ECON EINV KU
SUBJECT: NEW PUBLICLY-OWNED BANK "WARBA" WILL GIVE CITIZENS
FREE SHARES IN GROWING ISLAMIC BANKING SECTOR, BUT WILL IT
GIVE THEM A SENSE OF OWNERSHIP IN KUWAIT, INC?
Classified By: Classified by Economic Counselor Oliver B. John
for reasons 1.4 (b&d).
C O N F I D E N T I A L KUWAIT 001002
SIPDIS
STATE PASS FEDERAL RESERVE
E.O. 12958: DECL: 10/18/2019
TAGS: EFIN ECON EINV KU
SUBJECT: NEW PUBLICLY-OWNED BANK "WARBA" WILL GIVE CITIZENS
FREE SHARES IN GROWING ISLAMIC BANKING SECTOR, BUT WILL IT
GIVE THEM A SENSE OF OWNERSHIP IN KUWAIT, INC?
Classified By: Classified by Economic Counselor Oliver B. John
for reasons 1.4 (b&d).
1. (C) On Sept. 15, the Kuwaiti cabinet announced the
creation of Warba Bank as a public shareholding company and
the fourth Sharia-compliant bank in the country. Warba Bank
is being established by Amiri Decree and will have a share
capital of KD 100 million (USD 350 million). Kuwaiti
citizens will own a 76 percent stake in the bank (valued at
USD 265 million),with the remaining 24 percent of Warba's
stock held by Kuwait Investment Authority, the nation's
sovereign wealth fund. The press has reported that the bank
will be capitalized at one billion shares of KD 100 fils (35
cents) each, and the GoK will cover the cost of citizens'
subscriptions (i.e., give the shares to Kuwaiti citizens).
Observers expect the bank to open in the 2010/2011 timeframe.
According to Central Bank officials, it has not yet put its
papers in for licensing. Some observers here hold out hopes
that the distribution of free shares can build an "ownership
society" among less well-connected conservative tribal
elements, and possibly serve as a model to build support for
economic reform.
2. (SBU) In separate conversations with Econoff, Abdullah
Yousef Al-Saif, Sharia Compliance Consultant for the Bank of
Kuwait & the Middle East and Fawaz M. Al-Kulaib, Assistant
Manager for Boubyan Bank's Sharia Compliance Department,
welcomed the addition of Warba, arguing that it brings Kuwait
closer to its long-term goal of becoming an international
Islamic banking hub. Al-Kulaib further asserted that
Kuwait's financial market was capable of absorbing more banks
like Warba. Warba is starting with the same capital amount
(KD 100 million) as Boubyan Bank started with in 2004.
(NOTE: Boubyan Bank has grown slightly since its founding.
At the end of 2008, shareholders' capital was KD 116 million.
Total equity was KD 137.5 million. Assets under management
are KD 840.5 million, USD 2.9 billion. END NOTE.)
3. (SBU) Kuwait's Islamic banking market is one of the oldest
in the region. Kuwait Finance House (KFH) was established in
1978 by Amiri fiat, and had an effective monopoly in Kuwait's
most important business sectors: real estate and oil. KFH
was not regulated by the Central Bank (CB),until Law 30 was
passed by parliament in 2003. According to Al-Saif, Law 30
allowed new Islamic banks to be established and conventional
banks to convert to Islamic ones.
4. (C) COMMENT: Although Warba is the fourth in a string of
Islamic banks, giving shares away to all citizens is novel.
At first glance, this can be seen as the logical next step
in the GoK's policy of transferring the country's oil wealth
to its people through a generous system of government
largesse (whether subsidized housing, free education, or
government contracts). However, the Warba experiment could
potentially represent something quite different: an effort --
though paternalistic -- to give all citizens a sense of
ownership and a stake in their country's economic future. In
theory, GoK's provision of free shares to all citizens could
serve to make them actual stakeholders - particularly if the
bank makes money - and if it works with Warba, it could work
with future projects. Of course, the unanswered question is
whether these shares will in fact provide the relative
have-nots of Kuwaiti society (particularly tribal elements),
with a greater sense of ownership in a commercial realm
historically dominated by merchant families. The size of the
grant (about $240 per Kuwaiti citizen),and the fact that the
shares do not vest and consequently cannot be traded for
three years (in an effort to prevent shares from being
snatched up by wealthier investors),may lead some recipients
here to dismiss the government's gesture as just another
handout - and not a particularly valuable one at that. END
COMMENT.
********************************************* *********
For more reporting from Embassy Kuwait, visit:
visit Kuwait's Classified Website at:
http://www.intelink.sgov.gov/wiki/Portal:Kuwa it
********************************************* *********
JONES
SIPDIS
STATE PASS FEDERAL RESERVE
E.O. 12958: DECL: 10/18/2019
TAGS: EFIN ECON EINV KU
SUBJECT: NEW PUBLICLY-OWNED BANK "WARBA" WILL GIVE CITIZENS
FREE SHARES IN GROWING ISLAMIC BANKING SECTOR, BUT WILL IT
GIVE THEM A SENSE OF OWNERSHIP IN KUWAIT, INC?
Classified By: Classified by Economic Counselor Oliver B. John
for reasons 1.4 (b&d).
1. (C) On Sept. 15, the Kuwaiti cabinet announced the
creation of Warba Bank as a public shareholding company and
the fourth Sharia-compliant bank in the country. Warba Bank
is being established by Amiri Decree and will have a share
capital of KD 100 million (USD 350 million). Kuwaiti
citizens will own a 76 percent stake in the bank (valued at
USD 265 million),with the remaining 24 percent of Warba's
stock held by Kuwait Investment Authority, the nation's
sovereign wealth fund. The press has reported that the bank
will be capitalized at one billion shares of KD 100 fils (35
cents) each, and the GoK will cover the cost of citizens'
subscriptions (i.e., give the shares to Kuwaiti citizens).
Observers expect the bank to open in the 2010/2011 timeframe.
According to Central Bank officials, it has not yet put its
papers in for licensing. Some observers here hold out hopes
that the distribution of free shares can build an "ownership
society" among less well-connected conservative tribal
elements, and possibly serve as a model to build support for
economic reform.
2. (SBU) In separate conversations with Econoff, Abdullah
Yousef Al-Saif, Sharia Compliance Consultant for the Bank of
Kuwait & the Middle East and Fawaz M. Al-Kulaib, Assistant
Manager for Boubyan Bank's Sharia Compliance Department,
welcomed the addition of Warba, arguing that it brings Kuwait
closer to its long-term goal of becoming an international
Islamic banking hub. Al-Kulaib further asserted that
Kuwait's financial market was capable of absorbing more banks
like Warba. Warba is starting with the same capital amount
(KD 100 million) as Boubyan Bank started with in 2004.
(NOTE: Boubyan Bank has grown slightly since its founding.
At the end of 2008, shareholders' capital was KD 116 million.
Total equity was KD 137.5 million. Assets under management
are KD 840.5 million, USD 2.9 billion. END NOTE.)
3. (SBU) Kuwait's Islamic banking market is one of the oldest
in the region. Kuwait Finance House (KFH) was established in
1978 by Amiri fiat, and had an effective monopoly in Kuwait's
most important business sectors: real estate and oil. KFH
was not regulated by the Central Bank (CB),until Law 30 was
passed by parliament in 2003. According to Al-Saif, Law 30
allowed new Islamic banks to be established and conventional
banks to convert to Islamic ones.
4. (C) COMMENT: Although Warba is the fourth in a string of
Islamic banks, giving shares away to all citizens is novel.
At first glance, this can be seen as the logical next step
in the GoK's policy of transferring the country's oil wealth
to its people through a generous system of government
largesse (whether subsidized housing, free education, or
government contracts). However, the Warba experiment could
potentially represent something quite different: an effort --
though paternalistic -- to give all citizens a sense of
ownership and a stake in their country's economic future. In
theory, GoK's provision of free shares to all citizens could
serve to make them actual stakeholders - particularly if the
bank makes money - and if it works with Warba, it could work
with future projects. Of course, the unanswered question is
whether these shares will in fact provide the relative
have-nots of Kuwaiti society (particularly tribal elements),
with a greater sense of ownership in a commercial realm
historically dominated by merchant families. The size of the
grant (about $240 per Kuwaiti citizen),and the fact that the
shares do not vest and consequently cannot be traded for
three years (in an effort to prevent shares from being
snatched up by wealthier investors),may lead some recipients
here to dismiss the government's gesture as just another
handout - and not a particularly valuable one at that. END
COMMENT.
********************************************* *********
For more reporting from Embassy Kuwait, visit:
visit Kuwait's Classified Website at:
http://www.intelink.sgov.gov/wiki/Portal:Kuwa it
********************************************* *********
JONES