MONDAY, 9.00AM:
A PRETORIA court has placed the Islamic bank under provisional liquidation after a Reserve Bank-appointed auditor declared that the bank is insolvent.
The Islamic Bank operates in accordance with Muslim principles and charges no interest. Instead it takes up shares in any venture it lends to, and treats deposits as inputs into a pool used for investment.
The principle has proved itself in other parts of the world, but in South Africa the bank ran into trouble when the Transvaal Jamiat (council of theologians) withdrew support, accusing the bank of deviating from Islamic principles. The bank also invested heavily in property in Muslim areas of Johannesburg, which have failed to boom in the city’s stagnant property market.
The Reserve Bank will cover deposits up to R50 000, which means that it will safeguard 90% of the bank’s clients. The Bank says it had been monitoring the Islamic Bank for two years, extending it liquidity assistance, but a damning auditor’s report last week that accumulated losses were greater than capital and reserves, had forced immediate action.