Diversification of Islamic Financial Insturments
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restricted three areas, the direct influence for foreign capital over Sudan’s banking, the
insurance sectors and the export-import business. Moreover, the government tried to develop
and improve the banking facilities available to various sectors, especially the traditional sector
in the rural areas which desperately needed banking facilities, and by mid-seventies, private
foreign banks were allowed to operate in Sudan again, side by side with the nationalised
banks. However, these banks were prohibited from dealing with Sudanese citizens, but were
allowed to open accounts for import-export and for Sudanese working abroad. During that
time, the idea of ‘Islamisation’ of the modern banking system emerged in Egypt (Abdel Mohsin,
2005).
Emergence of Islamic Banking in Sudan
The introduction of Islamic banking system in Sudan came as an idea in 1966 when the Islamic
University of Omdurman, Department of Economics, called for the establishment of Islamic
banking in Sudan. However, this idea faced several obstacles and political changed which
delayed it until 1977 with the establishment of Faisal Islamic Bank with eighty-six founders
from Sudan, Saudi, and from some other Muslim countries who agreed to give six million
Sudanese pounds as the required capital for establishing this bank. The success of Faisal
Islamic Bank in 1977 in this short period encouraged the government to open five new Islamic
banks, which succeeded in attracting more depositors, and hence more branches were opened
all over the states in Sudan. (Abdel Mohsin, 2005).
With the introduction of the elements of Islamic banking since 1970s and their adoption by the
country’s entire financial system in 1991, Sudan become one of very few countries in the world
with its financial system built completely on Islamic principles (IMF, 2001). However, after the
peace agreement in 2005 which stipulated the division of wealth and authority between the
north and the south of Sudan, banks in the south of Sudan officially separated from the
authority of the central bank in the north and continued it’s operating as conventional banks
(Babiker 2011).
Current Financial System in Sudan
Sudan’s financial system consists of six types on institutions; the Central bank of Sudan,
commercial and investment Islamic banks (private, pubic and joint), Takaful and Retakaful
companies and Khartoum Stock Exchange.
Since early 90’s, various reforms have been done within the financial sector by the Sudanese
government with the assistance of the international organizations. These reforms include the
following (IMF, 2001).
 Banking supervision and prudential regulations for more financial stability.
 Liberalization of the financial sector for more flexibility in sectoral and regional credit
allocations.
 Monetary policy instrument that fulfils classical objectives of inflation and exchange
rate stability by affecting Islamic finance instruments rates (Murabahah and
Musharakah) used by banks, beside introducing new instruments for indirect
monetary management.
 Financial deepening through enhancing interbank credit and offering different
financial instruments for investment (government Sukuk).
 Institutional reforms.