Iranian experience Banks under Houthi control are threatened by the interest prevention law

English - الاثنين 26 سبتمبر 2022 الساعة 06:27 م
Sana'a, NewsYemen:

 Fears are rising in Sanaa and the areas under the control of the Iranian arm about the continuation of Houthi arrangements to prevent interest-bearing transactions in Yemeni banks, which portends a new economic catastrophe no less dangerous than the disaster of not paying employees’ salaries in their areas of control, according to the Yemeni Banks Association in Sana’a.

According to the association, it will cause a setback and a complete economic catastrophe that will lead to the formal and final disruption of commercial banking work in banks.

The law approved by the Sanaa government, which is not recognized internationally, at the beginning of this month, and was referred to an economic committee in preparation for referring it to Parliament, the Assembly strongly objected to it, and confirmed in a letter submitted to the governor of the Central Bank appointed by the militias in Sana’a, that there is no point in issuing such law is in light of the almost collapsed economic situation in the country and the division of the banking system.

In its letter, the association made a number of observations from the jurisprudential and legal point of view, and made it clear that this law is quoted by (95%) from a similar law issued in Libya in 2013, and because of the great warnings against its application from economists in Libya, the state decided to postpone its implementation until 2020, and it has not been implemented to date.

The association referred to the attempts of some Islamic countries to cancel the interest of banks to implement its jurisprudential vision, including Iran, Pakistan and Sudan, but it retracted its position after the serious deterioration in the economy and the currency rate and has not been able to recover from it so far.

The Houthi bill included the cancellation of all previous interests, including the previous credit interests of depositors, and the association believes that this will cause a major economic disaster for them, equivalent to the disaster of cutting salaries, since what depositors receive from monthly benefits on their deposits with the bank live on by millions of citizens, and this may result in a dangerous and unsafe reaction on their part, as they have reached the lowest levels of poverty.

The association warned of the state's loss - in reference to the authority of Sana'a - of the most important economic tool to control inflation and the price of the national currency in the event of this law being issued, stressing that the law will lead to further collapse in the price of the national currency, as well as the reluctance of banks to lend to the industrial, commercial and service sectors, and the reluctance of capital to invest in the country, which will result in an increase in unemployment and poverty in society.

The association indicated that the cancellation of the benefits would lead to a major societal shock among the citizens within the militias’ control because of the tragic situation in which they live in light of the interruption of salaries and the inability of the state - the Sana’a authority - to return their deposits in treasury bills, in addition to the high prices of services and oil derivatives.

While the association expressed its fears of security measures and events that customers will take against banks due to the inability of the Sana’a Central to return their deposits and deprive them of their interests, it pointed to the expected damages when canceling the benefits represented by the collapse of the credit capabilities of the banks as a result of the customers’ reluctance to deposit their money due to the lack of a rewarding return, which means that banks will stop financing commercial and investment activities until an appropriate alternative savings and investment mechanism is developed, and this will take years.

In its telegram, the association indirectly warned the Iranian arm of a popular uprising by customers and depositors who depend on interest.  Likewise, banks of neighboring countries opened branches in the south instead of Sanaa when reconstruction began after the end of the war and monopolized reconstruction contracts, and obtained huge profits and gains from which Yemeni banks would be deprived, stressing that this is a very important, fundamental and dangerous point.