In Jordan, Islamic finance is provided by four fully Sharia-compliant banks licensed by the Central Bank of Jordan, which offer residents accounts, home and car financing, cards and investments based on Islamic contracts such as Murabaha, Ijara and Mudaraba.
Four Islamic banks in the Jordanian landscape
Jordan's banking sector includes three domestic Islamic banks, Jordan Islamic Bank, Islamic International Arab Bank and Safwa Islamic Bank, plus one foreign Islamic bank, Al Rajhi Bank. All of them fall under the general banking law and central bank supervision.
Jordan Islamic Bank, a pioneer since 1978
Founded in 1978, Jordan Islamic Bank is the country's oldest Islamic bank and one of the first in the Arab world. It belongs to the Bahrain-based Al Baraka group and has a wide branch network, including outside Amman.
Islamic International Arab Bank, part of a major group
Established in 1998, Islamic International Arab Bank is the Islamic subsidiary of Arab Bank, one of Jordan's leading banking groups. Its customers have a dedicated Sharia board while benefiting from the strength and international network of the parent bank.
Safwa Islamic Bank and Al Rajhi, more recent arrivals
Safwa Islamic Bank started operating in 2009 as Jordan Dubai Islamic Bank before adopting its current name. In 2010, Saudi Arabia's Al Rajhi Bank became the first foreign Islamic bank to open branches in Jordan.
Financing an apartment in Amman through Murabaha
To buy a home, the bank acquires the apartment from the seller and resells it to the buyer with a margin payable in monthly instalments. The contract fixes the total price from the start; late payment cannot increase the debt for the bank's benefit.
Ijara Muntahia Bittamlik, the leasing alternative
Some banks prefer a lease ending in ownership: the bank remains the owner, collects rent that can be reviewed periodically, then transfers the property at the end. It meanwhile bears structural costs and the insurance of the property throughout the term.
New or used car: how does the Murabaha work?
The customer chooses a vehicle at a dealer, the bank buys it in its own name and resells it to the customer at a marked-up price, payable for example over five years. Registration in the customer's name follows the sale, often with a lien.
A mutual fund covering borrowers' death
Jordan Islamic Bank runs a mutual insurance fund financed by small contributions from customers who receive financing. If the debtor dies or becomes seriously insolvent, the fund can settle all or part of the remaining debt, in a spirit close to Takaful.
Saving through Mudaraba investment accounts
Depositors place their money in demand or term investment accounts. The bank uses it as mudarib and shares the profit according to an announced ratio; longer-term deposits usually receive a higher share of the profits.
Qard Hasan loans for studies or marriage
Several Jordanian Islamic banks set aside an allocation for Qard Hasan, a loan repaid without any addition. It mainly serves social needs such as university fees, a wedding or medical care, and is reserved for customers meeting specific criteria.
Islamic insurance regulated since 2011
Jordan adopted a dedicated framework for Islamic insurance in 2011. The companies concerned manage a participants' fund fed by contributions, and underwriting surpluses can be redistributed to policyholders, unlike commercial insurance.
What the 2012 sukuk law changed
The 2012 Islamic Sukuk Law gave a legal basis to government and corporate issuances. It provides Islamic banks with compliant securities in which to place their liquidity, a need that had long remained unmet in the local market.
Specialist external source
The Central Bank of Jordan publishes the list of licensed banks, including the Islamic banks, together with its instructions and reports on banking sector stability.