The Role of Islamic Banks in Yemen’s Reconstruction

Abstract

This study aims to activate the role of Islamic banks in bridging the financing gap for Yemen’s reconstruction, positioning them as a strategic alternative to depleted government resources. It examines and analyzes the various financing instruments offered by Islamic banks and assesses their suitability and capacity to contribute effectively to reconstruction projects in the Republic of Yemen. The study adopts a descriptive-analytical approach and a case study methodology, drawing on the experiences of Sa'dah and Al-Dhafeer. It examines the Yemeni banking sector, focusing on a sample of Islamic banks, namely Saba Islamic Bank, Tadhamon International Islamic Bank, and Yemen Bahrain Shamil Bank. The findings indicate that the diversity of Islamic investment and financing instruments has a positive impact on financing reconstruction. The study recommends establishing a Federal Reconstruction Bank and introducing a legal framework for sovereign guarantees to investors. It further proposes applying the istisna'a financing model to public infrastructure projects, diminishing musharakah to the energy sector, and murabaha to housing reconstruction, which accounts for 74% of the destruction. These measures would transform Islamic banks from conventional lenders into active development partners engaged directly in reconstruction efforts.