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Family entrepreneurship and Family

entrepreneurship
banking support in Kuwait: and banking
support
conventional vs Islamic banks
Nour Mahdi Abdullah
Kuwaiti Business Town Real Estate Co, Kuwait City, Kuwait
Received 17 June 2020
Revised 28 June 2020
Abstract Accepted 29 June 2020
Purpose – In this paper family entrepreneurship and its banking support in Kuwait is discussed, as one of the
wealthiest countries in the world. In the beginning is provided an overview of the Kuwaiti context of
entrepreneurship and small- and medium-sized enterprises (SMEs), followed by discussion of family
businesses’ profile and benefits to the economy and society. The paper discusses the banking sector in Kuwait
and its contribution to the development of family entrepreneurship and the small business sector in Kuwait.
Design/methodology/approach – For purposes of this study a multiple case study approach and a
snowballing sample was used.
Findings – Even that, Kuwait is considered as an Islamic country, from the answers and comments that were
received from our research, we concluded that most of the family businesses cooperate with conventional
banks, instead of Islamic banks.
Practical implications – Several supporting products are described and analysed in this paper, which can
help family business and SMEs’ owners where to address when a support is needed. Also are provided
information on similarities and differences between Islamic and conventional banking.
Originality/value – This paper is one of the first papers that discusses family businesses and
entrepreneurship in Kuwait and the support they receive from Islamic and conventional banks. It provides
original quotes from family business owners regarding this topic.
Keywords Family entrepreneurship, Small business, Ecosystem, Banking, Kuwait
Paper type Research paper

By men whom neither traffic nor merchandise can divert from the remembrance of Allah, nor from
regular prayer, nor from the practice of regular charity (Holy Qur’an, 24:37)
An honest and sincere businessman will be placed with the prophets, siddiqin and al-syuhada
(Prophet Muhammad S.A.W., al-Tirmidhi, 1987, no. 1209, p. 515)
they say, trade is like riba, but Allah has permitted trade and prohibited riba. . .(Holy Qur’an, 2:275)
O you who believe! do not devour usury, making it double and redouble, and be careful of (your duty
to) Allah, that you may be successful (Holy Qur’an, 3:130)

1. Introduction
Entrepreneurship in family businesses, in recent times, arouse special interest among
academics, practitioners and policymakers (Fayolle and Moriano, 2014; Hisrich and
Ramadani, 2017; Ratten et al., 2018a; Wright et al., 2016). This interest is due to the
benefits that brings entrepreneurship to the economy and society, respectively
“entrepreneurs’ creativity, their ability to bring innovations to the market and the
willingness to face risk are changing the world”. All these people by creating new
workplaces for themselves, families and friends, producing new products and services Journal of Family Business
Management
contribute to the overall socio-economic development of their countries (Ramadani and © Emerald Publishing Limited
2043-6238
Schneider, 2013; Ratten et al., 2018b; Seaman, 2015). DOI 10.1108/JFBM-06-2020-0049
JFBM In order to fulfil their goals and conduct their business activities, entrepreneurial family
businesses need a substantial support by the financial institutions. In this regard, banks can
play an important role with their products and services (Ratten, 2012). Banks can be divided
into conventional and Islamic banks.
The aim of this paper is to provide answers to the main research questions of this study:
What kind of products and services provides the bank to family businesses? What are the
reasons of using the certain products/services? Whether the family business owners prefer
working with conventional or Islamic banks? and How the family business owners comment the
way of working of Islamic banks from their lenses?. Further, considering that the most of
studies are focused on conventional banks, this paper aims to shed a light on Islamic banks,
which are considered as the main pillar of the Islamic finance industry. These banks entered
to the financial industry in the late 1960s and early 1970s (Jamaldeen, 2012). Islamic banks
conduct many functions that are very similar to those of conventional banks, but they must
by based on the Shariah-compliant ways. Consequently, the products and services that are
provided by Islamic banks differ from those provided by the conventional banks (Ramadani
et al., 2015). Beck et al. (2013) found that Islamic banks are less cost-effective, but are better
capitalised, have higher asset quality and are less likely to disintermediate during crises. All
this made that Islamic banks show a better stock performance during the recent crisis.
This paper is structured as follows. In Section two an overview of the Kuwaiti context,
family business and banking sector is provided, while in section three the research
methodology is described. In section four the findings are provided, where several quotes and
statements from family business owners on banking sector in Kuwait are indicated. The
paper ends with the implications, limitations and future research avenues section.

2. Literature review
2.1 Context of Kuwait
Kuwait is a country located in Western Asia, i.e. in North-East of Arab Peninsula, sharing
borders with Iraq (North-West) and Saudi Arabia (South-West). In the seaside borders with
Iran. It has a population of 4.6 million people, where 1.3 million are Kuwaitis and 3.3 million
are expatriates, respectively 30.36% are Kuwaitis, 40.42% Asians, 27.29% Other Arabs,
1.02% Africans, 0.39% Europeans and 0.52% other. Kuwait covers an area of 17,818 square
meters. Kuwait city is the capital of the country (Ramadani et al., 2020).
Kuwait belongs to the group of high-income countries, possesses 10% (104 billion barrels)
of the world’s oil reserves and has the fourth highest per capita income (2nd in GCC, after
Qatar). The Kuwaiti currency is dinar, which is considered as the highest valued currency in
the world (Siliconindia, 2012). Kuwait has a petroleum-based economy, where petroleum
accounts for 50% of GDP and 90% of the government income (CIA Factbook, 2016). Financial
services are very well developed, making Kuwait a leader in the financial industry in the GCC.
In Table 1 are provided some relevant information about the socio-economic profile of Kuwait.
Recently, even that a significant development of entrepreneurship and small business
start-ups is noticed in Kuwait (Saltzman, 2014), where Doing Business (2018) ranked Kuwait
at 96th position, out of 190 countries, World Bank reported that small- and medium-sized
businesses made up only 3% of Kuwait’s GDP in 2016, when the global average in high-
income countries was around 50% (Domat, 2020). Now, starting a business in Kuwait is easier
due to establishment of the one-stop shop and improving online registration (Ramadani et al.,
2020). In April 2013 was established the National Fund for the Promotion and Development of
SMEs as one of the most important public institution for supporting SMEs in Kuwait, with a
capital of 2 billion KWD (around 6.6 billion USD). But, should be noted that small and
medium enterprises (SMEs) in Kuwait are not officially defined and there is a lack of clear
categorization of enterprises. Due to this, it is very hard to find any report on the SMEs
The Kuwaiti socio-economic profile
Family
entrepreneurship
Official name State of Kuwait and banking
Government type Constitutional Emirate
Population 4.2 million support
30.5% Kuwaiti
27.3% Other Arab
40.4% Asian
1.0% African
0.3% European
0.5% Other
Currency Kuwaiti Dinar (KWD)–1 KWD 5 3.29 KWD
GDP (PPP) 303 Billion USD
GDP per capita 69,669 USD
Trade Imports: 33.3 billion USD
Exports: 52.3 billion USD
Major exports: Petroleum
Imports: Cars
Trading partners Exports: South Korea, China, Japan
Imports: China, UAE, United States
Inflation 1.3%
Global competitiveness index 52 out of 138
Doing business 96 out of 190
Global corruption index 75 out of 176 Table 1.
Income level High income The Kuwaiti socio-
Source(s): Based on Ramadani et al. (2020) economic profile

performance and contribution in Kuwait (Ramadhan and Girgis, 2018). This paper, beside
others, will provide a substantial contribution in this regard.
Innovation represents a very important “ingredient” of entrepreneurship, proved initially
by Schumpeter (1934) and then by many other scholars. There is a report – The Global
Innovation Index (GII) – where one can find information on the capacity and success of
innovations in respective countries. This index id consisted of two sub-indices, the Innovation
Input Index and Innovation Output Index. The first index includes: institutions, human
capital and research, infrastructure, market sophistication and business sophistication, while
the second one includes knowledge and technology outputs and creative outputs; also, here is
included the innovation outputs from the innovative activities of the respective country
(Dana et al., 2020).
According to the Global Innovation Index for 2018, Kuwait is placed at the 60th position or
at 81st by the Innovation Input Sub-Index and at 49th by the Innovation Output Sub-Index. In
comparison with the other Gulf countries (Table 2), Kuwait is positioned better than Bahrain,

Country/Index Global innovation index Innovation input index Innovation output index

GCC countries UAE (38th) UAE (24th) Kuwait (49th)

Qatar (51st) Saudi Arabia (46th) UAE (54th)
Kuwait (60th) Qatar (47th) Qatar (60th)
Saudi Arabia (61st) Oman (57th) Bahrain (70th)
Oman (69th) Bahrain (74th) Oman (75th) Table 2.
Bahrain (72nd) Kuwait (81st) Saudi Arabia (78th) Global innovation
Source(s): Based on Dutta et al. (2018) index rankings in 2018
JFBM Oman and Saudi Arabia, while Qatar and UAE are ranked higher than Kuwait. If we see
positions according to the sub-indices – Kuwait in the lowest place based on Innovation Input
Sub-Index, while it is in the best place based on Innovation Output Sub-Index.

2.2 Family business in Kuwait

In the literature about family businesses you can find a lot of definition on family businesses.
Every author defines family businesses based on his view and criteria. There is no generally
accepted definition about family businesses. Family businesses include small businesses
serving a neighbourhood and large conglomerates that run their businesses in multiple
industries and countries (Ramadani et al., 2015).
According to Poza and Daugherty (2013), a particular business in order to be considered as
a family business, it must encounter the following qualities: (1) ownership control (15% or
higher) by two or more members of the family; (2) strategic influence by family members on
the management of the firm, either by being active in management, continuing to create
culture, serving as an advisor or board member or by being an active shareholder; and (3)
concern for family relationships; the dream or possibility of continuity across generations.
Family businesses and entrepreneurship represents the bedrock of every economy and
society. Family businesses importance in country economies in terms of contribution to the
employment, income redistribution, sustainable development and gross domestic product is
significant (Ejupi-Ibrahimi et al., 2020; Hacker and Dowling, 2012; Poza and Daugherty, 2013).
The same situation is in the Gulf Cooperation Council Countries (GCC) (Martinez Garcia et al.,
2018) in general, and Kuwait in particular (Welsh and Raven, 2006).
Despite the enormous contribution to the economic and social development, the academic
interest about family businesses in Kuwait is scarce and fragmented so far. There cannot be
found a specific research done exclusively for Kuwait in order to create an image about the
general features of family business in this country. In this part we will provide some data
generated from a research done in general for GCC, where Kuwait belongs, and somehow,
they might represent the state and profile of these businesses in this country as well. This
implies that a well-structured and more comprehensive research of family businesses in
Kuwait is more than necessary.
In GCC, based on the research done by KPMG (2018), the fast and flexible decision-making
process is the major advantage for the 59% of the surveyed family businesses, the long-term
perspective for 57% of them and the shared values and ethos for 54% of the family
businesses. About the family business’s prospects over the next 12 months, 24% are very
confident, 33% confident and 17% are concerned. In the past 12 months, 33% of surveyed
family businesses have increased their revenues, 38% have maintained the same revenues
and 28% have decreased the revenues. The same results are shown with regards to the staff
number of family businesses. About the question “How important is preparing and training a
successor before leadership succession takes place?”, 55% of them declared that it is very
important, 33% important, 10% not important and 2% did not answer this question. None
declared that this issue is not important at all. Further, 38% are thinking on passing the
management of the business to the next generation, 21% on passing the ownership of the
business to the next generation, 14% on passing governance (ultimate control) of the business
to the next generation, while around 30% on selling the business to others (third party, other
family members or current employees). Regarding the priorities for the next 2 years,
improving the profitability is the main priority for 81% of the surveyed family businesses,
increasing revenues (for 55%), diversifying the assortment with new products and services
(for 38%), attracting new talents (for 33%) and being more innovative (for 30%).
KPMG (208) concluded that in the GCC, and Kuwait as well, family businesses are all
around us – from small and medium sized enterprises (SMEs), to renowned multinational
corporations – and they represent the backbone of the GCC (and Kuwait) economy. Being Family
such important for the countries’ economies they deserve a more serious approach from the entrepreneurship
academic institutions (researchers) and policymakers.
and banking
2.3 Banking sector in Kuwait support
2.3.1 A general overview. The banking sector in Kuwait is consisted of three types of banks:
conventional (commercial), Islamic and specialised banks. Recently, there are operating 23
banks, where 11 are local and 12 are branches of foreign banks (Figure 1). The local banks are
consisting of five conventional banks, five full-fledged Islamic banks and one specialised
bank, where the conventional banks make up 58% of the local banking sector’s assets
(Central Bank of Kuwait, 2019). All banks are regulated and supervised by the Central Bank
of Kuwait, which also serves as banker and financial adviser of the government and takes
care about the stability of the Kuwaiti Dinar (KWD).
Below are provided the profiles of local banks that operate in Kuwait (ADV Ratings, 2020;
Corporate Finance Institute, 2020):
National Bank of Kuwait (NBK) was founded in 1952. It is the first local bank and first
shareholding company in Kuwait and in the entire GCC region. NBK provides consumer and
private banking, corporate banking, investment banking and asset management, Islamic
banking, group centre and international segments. The bank headquarter is in Kuwait City.
On March 31, 2019, the bank’s assets were valued at 90 billion USD, while it generated 1.2
billion USD profit and around 3.5 billion USD revenues. The bank also has branches in
Geneva, London, Paris, New York, UAE and other countries.
Kuwait Finance House (KFH) was established in 2002 as a second Islamic bank in Kuwait.
This bank is an entirely owned subsidiary of KFH-Kuwait. KFH offers retail banking and
finance services, corporate banking, investment portfolio, treasury and capital markets
products. The bank employs 15,000 staff in its 500 branches and provides services through

Figure 1.
Banking structure of
Kuwait
JFBM 1,263 ATMs across the region. It is present in Bahrain, Germany, Malaysia, Saudi Arabia,
Turkey and United Arab Emirates (UAE). In 2016, the bank’s total assets amounted to 54
billion USD, while the net profit reached 625 million USD. KFH’s activities are conducted
based on the Islamic Sharia Law.
Burgan Bank (BB) was established in 1975 and is headquartered in Al-Safat. BB provides
in Kuwait private banking, retail banking, corporate banking, investment banking, treasury,
etc. It is a subsidiary of Kuwait Projects Company Holding KSC. The BB 2016 results show
that the total assets are amounted to 24 billion USD, customer deposits to 12.4 billion USD and
net profit of 221 million USD.
Gulf Bank (GB) was established in 1960. It is the fourth largest bank in Kuwait. GB is
based in Al-Safat and manages a network of 60 branches throughout the country. The
leading credit rating agencies (Standard and Poor’s, Moody’s and Fitch) ranked it in the “A”
category. It provides services to individual, corporate and institutional customers.
It operates through commercial banking, treasury and investments segments. It employs
around 1,500 staff. As of 2018, the bank’s total assets of GB were 19.6 billion USD, while the
net profit was 143 million USD. On May 5, 2019 the bank’s market value was amounted to 3
billion USD.
Commercial Bank of Kuwait (CBK) was established in 1960 and is the second oldest banks
in Kuwait. It provides commercial banking services – loans, deposits and credit cards. The
bank headquarter is in Al-Safat. CBK offers corporate banking, retail banking investment
banking and treasury. The bank has 1,490 employees in total. In 2016, the assets were
amounted to 13 billion USD and net profit reached 153 million USD. It is ranked as A3 by
Mood’s and Aþ by Fitch.
Al Ali Bank (AAB) was established in 1967 with a headquarter in Al-Safat Square, Kuwait
City. The bank has 30 branches in Kuwait and 42 across UAE (2) and Egypt (40). It provides
corporate banking, retail banking and international banking services. Moody’s ranked it as
A2, while Fitch as Aþ bank and it is considered as the safest bank in the Middle East. In 2016,
total assets of the bank were 12 billion USD and net profit was 153 million USD. The number
of employees is 1,000 people.
Boubyan Bank (BbB) was established in 2004. It operates as a subsidiary of National Bank
of Kuwait with 30 branches and employs 1,400 people. The bank provides various banking
products and services in the Middle East, North Africa, North America, Europe and Asia. It
also offers Murabah, Ijarah, Takaful insurance products. It operates through four segments:
consumer banking, corporate banking, investment banking and treasury. In 2016, the bank
reported total assets of 10.3 billion USD and a net profit of 115 million USD.
Al Ahli United Bank (AAUB) was established in 2000. The bank provides several product
and services related to Islamic, private, retail, commercial and investment banking and
treasury. It also offers global fund management and life insurance services. The bank
operates through the 110 branches, including 22 in Bahrain, 38 in Kuwait, 37 in Egypt, 11 in
Iraq and 1 branch in the United Kingdom. It also oversees 20 branches in the Sultanate of
Oman and 11 branches in Libya through its managed associates. The total assets in 2016
were 107.8 billion USD, while the net profit was 14.26 billion USD.
Kuwait International Bank (KIB) was established in 1973 as an Islamic bank. KIB provides
several banking services, including deposit-taking, financing transactions, direct investment
and credit cards. KIB operates through these segments: commercial and international
banking, retail banking, treasury, fund management and institutional banking, investment
management, etc. It manages 26 branches throughout Kuwait. In 2016, the bank reported
total assets of 6.1 billion USD and a net profit of 60 million USD.
Warba Bank (WB) was established in 2010. This bank provides products and services
based on Shariah Law. WB has a network of 12 branches that are located across Kuwait. In
2018, the bank assets were amounted to 7.2 billion USD.
 Beside the above-mentioned banks, in Kuwait operate one specialised bank – Industrial Family
Bank of Kuwait (IBK). It was founded in 1973 and is headquartered in Al-Sharq. The bank entrepreneurship
provides conventional and Islamic loans and credit facilities to the industrial sector,
conventional and Islamic asset management services, including portfolio and fund
and banking
management, and conventional and Islamic direct investments in various sectors. It support
employs around 221 individuals. In 2016, the bank’s total assets amounted to 2.0 billion USD
and net profit reached 30 million USD.
The list of foreign bank branches is consisted of the following (Alphabetical order):
(1) Al Rajhi Banking and Investment Corp.
(2) Bank Muscat
(3) Bank of Bahrain and Kuwait
(4) Bank of BNP Paribas
(5) Bank of HSBC Middle East
(6) Citibank
(7) Doha Bank
(8) First Abu Dhabi Bank (Branch)
(9) Industrial and Commercial Bank of China
(10) Mashreq Bank
(11) Qatar National Bank
(12) Union National Bank
According to the data of Central Bank of Kuwait (2019), 71% of banking assets in Kuwait are
held by the five largest banks, where the National Bank of Kuwait controlled the largest
share, respectively 24% of the country’s local banking sector, followed by Kuwait Finance
House (21%), Gulf Bank (10%), Burgan Bank (9%), Commercial Bank of Kuwait (7%) and
others (29%).
If we analyse the report of Central Bank of Kuwait (2019), there can be noticed these main
movements and situations in the (local) banking sector in Kuwait:
(1) Total deposits in 2018 were amounted to 152 billion USD, with a Compound Annual
Growth Rate (CAGR) of 4.3% since 2014. Total deposits in 2017 and 2016 were
amounted to 147, respectively 140 billion USD. The private sector remains the largest
depositor, with a share of 80% in the total deposits, in 2018. Similar share was
observed in the period of 2014–2018.
(2) Total credits in 2018 were amounted to 130 billion USD, while in 2014 they were
amounted to 112 billion USD, showing a growth trajectory to overall banking assets,
with a CAGR of 5.2% from 2014 to 2018. As main drivers of the credit growth are seen
loans/financing to the oil and gas sector, with a CAGR of 42.2%. In 2016, in this sector a
doubling of value was recorded, because the oil price crisis hit the oil and gas
companies balance sheets. Personal credits are accounted for 40% of total credit
facilities in 2018, dominated by personal loans/financing offered to employees. Here
should be noted that Central Bank of Kuwait, in November 2018, made several changes
in regulations related to granting personal loans/financing, which are expected to
boost credit growth in the future. According to these changes, consumer loans/
financing facilities will have a maximum value set to 25 times the net monthly salary of
JFBM the client, with a cap of 82,000 USD. Housing loans will be caped to 231,000 USD, which
means that a single client can be borrowed to 313,000 USD maximum. Further,
monthly loan/financing instalments will be capped at 40% of the borrower’s net salary.
(3) During the period of 2014–2018 credit-deposit gap gradually narrowed, because the
credits grown more than deposits. In 2018, credits amounted to 85% of deposits value,
compared with 82% in 2014. At the moment, this situation maybe will not impact
negatively the liquidity of the banking sector, but in a long-term, if the banks will not
increase their deposits or diversify their funding bases, an increased pressure on the
banks’ liquidity will be felt.
(4) During the period of 2014–2018, the banks in Kuwaiti showed a marginal increase in
profitability, noting a consolidated return on average assets (ROAA) ratio of 1.3% in
2018, comparing with 1.1% in 2014. Further, the ratio of gross non-performing loans
(NPL) has progressively declined to record low level of 1.6% in 2018, in comparison
with 2.9% in 2014. This decrease is due to the high concentration in housing loans and
financing and very less in credit exposure to the oil sector.
The deputy chief executive of National Bank of Kuwait, Shaikha Al-Bahar will notice shortly
that “the banking sector in Kuwait is in a sweet spot relative to other banks in the region with
a lot of upside to current performance trends” (Noonan, 2018). The rating agency, Moody’s, an
American company for credit ratings, research, tools and analysis for the global capital
markets, noted that the banking system of Kuwait is stable, due to the continuity of the
government-funded projects and focus on private sector development, which will contribute
to the economic growth and subsequently boost business for the Kuwaiti’s banks (Corporate
Finance Institute, 2020). Considering that the Kuwaiti banks will be the most important
partner of different government projects, including the private-public infrastructure projects
(PPPs), it is expected that this sector will continue growing.
Immense contribution and impact on the banking sector development will play “Vision
2035”, by creating opportunities for banks to enrich their corporate offers and credit facilities
(Domat, 2020). In this regard, Antoine Daher, the Chief Executive Officer of Gulf Bank will
declare: “Kuwait’s banking sector is well-capitalised and characterised by a high-quality asset
base, and it is set to play a primary role in realizing the New Kuwait Vision 2035. Kuwaiti banks
can provide finance for various projects, such as the upgrade of infrastructure, and finance
businesses that contribute to economic diversification. These banks can also offer the private
sector and SMEs better access to credit, which would enhance their role in the economy,
encourage trade and support businesses that intend to deploy the latest technology. Financial
inclusion is another area for the banking sector to support the economy, so that all segments of
society have access to banking products and services” (Central Bank of Kuwait, 2019, p. 17).
2.3.2 Islamic vs conventional banking. As we noted previously, in Kuwait operate Islamic
and conventional (commercial) banks. Some authors (Azmat et al., 2015; Grassa and Gazdar,
2014; Ratten et al., 2017a, b) noted that there cannot be found completely pure Islamic or pure
conventional banks, but they can be characterised as Islamic or conventional, if they conduct
most of the activities and provide most of products and services based on Shariah principles,
respectively commercial principles of working [1]. In this section will be presented the
features of Islamic and conventional banking, while in the next section will be described the
products and services that Kuwaiti Islamic banks provide to entrepreneurs (family business
and SMEs owners).
Jamaldeen (2012) in his book “Islamic Finance for Dummies” has summarised the main
differences between Islamic and conventional banking, as follows:
2.3.2.1 Shariah board. In Islamic banking exist a Shariah board, which is consisted of
Islamic scholars who are prepared and qualified to discuss and propose solutions related to
the business contracts. This board also supervise the bank operations in order to be ensured Family
they conduct their activities based on the Shariah principles. Islamic banks, besides avoiding entrepreneurship
interest (prohibiting usury), they must comply with other principles as well. They should also
avoid speculation (gharar), gambling (maisir), oppression (zulm) and investing in prohibited
and banking
industries (haram). Thus, to interpret all these principles a deep knowledge is needed, and it is support
very difficult to take Shariah-based decisions by those who possess superficial knowledge of
Islamic principles. The Islamic scholars, members of this board, have spent all their lives in
studying these principles and they are capable to interpret the Islamic Shariah law, even that
sometimes they have different opinion on some issues. Sharia board is essential for Islamic
banks and usually it is seen as a backbone of the bank establishment and operation.
2.3.2.2 Concepts of money and the basis of transactions. One of the main purposes of
Islamic banking is to promote Islamic principles and also encourage entrepreneurs/
businessmen that profit can be achieved by following these principles. Islamic principles
recognise that money has a value, but with some limitations, respectively money cannot
increase its value only by passing a period of time; money’s value can be increased by
investing in projects which by their selves can be increased in size, in success, etc. Earning
money and gaining profit, as in conventional banking, is a main function of Islamic banks, but
the difference here is that conventional banks act as profit-making institutions that do not
base their operation on religious principles. Islamic banks, in order to stay in the market, must
earn money, but during the completion of this goal, they always should consider Islamic
business laws, called fiqh-u–muamalat. They also should respect the country’s financial laws
and regulations, in which they operate.
2.3.2.3 Relationships with clients/customers. In conventional banks, when a client/
customer deposits his/her paycheck to a bank, they institute a creditor–debtor
relationship, respectively the bank takes the responsibility to pay back the client/
customer’s money with or without interest, as per agreed contract between parties.
Likewise, the roles reverse when the client/customer takes a credit and the bank provides
it. The relationships between the Islamic bank and the client/customer are completely
different – their relationships do exist at times in Islamic banking. To understand the
relationship between parties in Islamic banking, the client/customer must know what
contract that relationship is based on.
2.3.2.4 Investments in the bank. In conventional banks, investments usually are based on
guaranteed principal and receiving a fixed amount of income. This means, if you deposit
5,000 KWD in a one-year term deposit, the bank should pay back you the principal and the
interest rate charged for one year. In Islamic banking, the situation is different. If you deposit
the money in the bank with expectations to earn more money for your savings – your
principal and returns are not guaranteed. In Islamic banking, you share the risk with the
banks, in case it loses money due to an unexpected business failure. Here, the bank isn’t liable
to pay the money to you, as it is case in conventional banking.
In order to create e better picture on differences between Islamic banking and
conventional banking, based on several sources about Islamic financing and banking, we
have summarised them in Table 3.

2.4 Family entrepreneurship and SMEs supporting programs of Kuwaiti Islamic banks
The Islamic financial system, which includes the Islamic banks as well, is regulated by the
law of commerce, known as fiqh al-mu’amalat. According to Salman and Nawaz (2018, p. 156),
fiqh al-mu’amalat considers issues of “social justice, equity, and fairness in all business
transactions, and promotes the entrepreneurship, protects the property rights and
emphasises the transparency of contractual obligations according to divine law of Allah
and his last messenger Muhammad (PBUH)”.
JFBM Products Islamic banking Conventional banking

Deposit and Islamic banks offer deposit products based on Conventional banks accept deposits on the
liabilities the following structures basis of loan for all types of deposit accounts
including term deposit, savings and
currents accounts
(1) Qard – Current accounts are offered Interest-based returns are provided for the
under this contract where the risk of the savings accounts and term deposits,
funds lies with the bank and no added whereas current accounts may offer free
benefits are provided to the client solely banking facilities
based on this facility. However, clients
may be allowed to avail those facilities
which are offered across the board
(2) Mudarabah – a type of partnership Conventional bank invests the deposits in
where client funds are invested in non-Shariah compliant avenues and
various businesses and returns are subsequently earns non-Shariah compliant
shared between the bank and client as returns
per the agreed profit-sharing ratio
whereas the loss is shared as per the
investment ratio. Term Deposit and
Savings
Accounts are offered on the basis of
Mudarabah
Lending / Islamic banks do not permit financing to In conventional banks, all types of
Financing industries that cause harm to the society such industries are financed, only businesses
as alcohol, tobacco, prostitution, etc. deemed illegal by the law of the land are not
supported
Islamic bank takes the risk of the asset No risk of underlying assets
In come is earned through sale or leasing Income through interest. Conventional
contracts. One of the Islamic Bank business banks are in the business of lending and
model is based on trade; thus, it needs to borrowing money based on interest
actively participate in trade and production
process and activities
Share profit and bear loss as the case may be. Late payment charges on delayed payments
Under Shariah law finance can be provided and shall constitute bank income
through several types of contract. Each type
specifies how risk is shared between the
enterprise and the supplier of finance
In case of late payment or default by the client, Relation of customer and bank is of
there will be no penal charges. However, to creditor–debtor
instil a payment discipline, Bank is authorized
to recover an amount at a predetermined
percentage as compulsory contribution to
Charity Fund constituted by the bank
approved Shariah Board. This contribution to
Charity Fund shall not constitute income of
the bank
The bank will deploy the Islamic Funds in
only Shariah Compliant avenues
Table 3. Relationship of customer and bank is of seller-
Differences between buyer and partner
Islamic banking and
conventional banking (continued )
Products Islamic banking Conventional banking
Family
entrepreneurship
Leasing Rentals start after the delivery of asset, not Lease commences the very day on which the and banking
/Ijarah from the day the price has been paid by Bank price is paid by the bank, whether the
customer has taken the delivery or not support
Bank is the owner of the asset therefore it is Expenses incurred in the process of
liable to pay all expenses incurred in the purchase of asset are paid by the customer
process of its purchase
The customer is responsible only for misuse Lease does not differentiate between wear
and negligence but not for events beyond and tear or losses caused by the negligence
control in Auto Ijarah, each situation is treated of customer and customer is liable for cost
separately incurred due to natural disasters
If the customer fails to pay rental on due date, Penalty charges are taken from customer on
customer undertakes to pay charity which is late payment. They are taken as income by
credited into charity account, for further the bank
disbursement to charitable organizations
If the customer breaks any term of the In a lease agreement it has been noticed that
agreement, the bank has a right to terminate unrestricted power has been given to bank
Auto Ijarah unilaterally. However, if there is to terminate the lease unilaterally
no contravention at
Source(s): https://www.ubldigital.com/Banking/UBL-Ameen/Knowledge-Center/Differences-between-
Conventional-Bank-and-Islamic-Bank; https://www.sc.com/global/av/pk-ib-cb-differences.pdf; https://www.
nrspbank.com/differences-between-islamic-and-conventional-banking; https://islamicbankers.me/2015/07/11/
the-difference-between-islamic-banking-financing-and-conventional-banking-loans/ Table 3.

As it was mentioned earlier, the Kuwaiti government is working intensively to encourage the
entrepreneurial spirit within the family and SMEs sector, in order to increase their
investments and contribution to the overall socio-economic development of the country. The
establishment of the National Fund for Small and Medium Enterprise Development (in 2013)
and other supporting programs for family and SMEs sector, made the Kuwaiti banks to not
sit idly by – but they also started to think on the development of supporting packages for this
sector.
Islamic banks, in order to meet the customer needs, based on Shariah Law, have developed
different products as alternatives to those available by conventional banks. The main
products offered by Islamic banks are the following (Chhapra et al., 2018; Jamaldeen, 2012;
Shahid et al., 2015):
2.4.1 Products based on equity participation (profit and loss sharing). In order to achieve a
social justice, Islam requires that both parties, banks and entrepreneurs, should be involved
in the economic activity and share profit and loss. As a broadly used Islamic banks’ products
that support the sharing of profit and loss are:
(1) Mudaraba. According to this contract, the bank provides capital to the family
business owner/entrepreneur, who conducts and manages a certain economic
activity, and if this activity earns profit, then both parties share that profit. If that
economic activity ends with loss, which does not occur as a result of owner/
entrepreneur’s misconduct, then only the bank bears that loss, while the owner/
entrepreneur loses his effort, time and the opportunity to get profits. If the loss comes
because of the owner/entrepreneur’s misconduct, then both share the loss.
(2) Musharaka. These products include involvement of parties in a joint venture
business by investing capital and entrepreneurial skills and knowledges. In this kind
of contract, both share any profit or bear any loss generated by the business.
JFBM 2.4.2 Products based on investment financing (sale and lease contracts). This group of products
includes the following:
(1) Murabaha. In this case, the banks sold an asset to the owner/entrepreneur at cost plus
markup. Both parties agree the sale price in advance, while the purchase may occur
over time in several instalments or as a one-time payment, depending on the contract
between parties.
(2) Ijara: These are leasing products, where the bank purchases an asset, which the
owner/entrepreneur needs and then leases it to the owner/entrepreneur.
(3) Salam. These products include payments that are made in full, upfront, for an asset to
be delivered on an agreed specific date in the future.
(4) Istisna: These products are used for financing a certain project, where the financier
pays for the project to be delivered in the future.
In the following part will be mentioned several products that are developed by the two main
Islamic Kuwaiti banks in order to support the sector of family businesses and SMEs [2].
Kuwait Finance House (KFH) provides these products to entrepreneurs and family
business owners:
(1) Murabaha
 Overview: This product is used to purchase merchandise and equipment from
producers or local or international suppliers while the value is paid based on
instalment-based payment agreements between the customer and KFH.
 Service requirements: Finance request application along with a report on the last
three balance sheets.
 Benefits: Payment based on instalment system between the customer and KFH.
 Fees: Fees shall be charged based on presented study and instalments.

(2) Real estate Murabaha

 Overview: This product is used to provide facilities to your company to purchase
real estate while the value may be paid as per instalment-based payment
agreements between the customer and KFH.
 Service requirements: Finance request form along with a report on the last three
balance sheets.
 Benefits: Payment on instalment basis between the customer and KFH.
 Fees: Fees shall be charged based on presented study and instalments.

(3) Al-Istisna
 Overview: KFH leases assets on monthly instalment basis while the customer
shall, at the end of the contract, return the equipment to KFH or purchase the
same.
 Service requirements: Finance request form and specified the real estate to be
financed – feasibility study presented by Kuwait Manager Company.
  Benefits: This type of contract provides customer with low-cost purchase of Family
assets required for major projects, e.g. real estate, equipment etc. which form entrepreneurship
major load on capital.
and banking
 Fees: Fees differ as per a request through Kuwaiti Manager Company. support

(4) Al-Tawarruq
 Overview: The customer purchases an easy saleable asset from KFH based on a
certain price. The customer sells the asset on spot and benefits from the liquid
cash amount while he shall settle asset value to KFH on a later date.
 Service requirements: Finance application along with a report on the last three
balance sheets.
 Benefits: Benefit from liquid cash while asset value is paid on instalment basis to
KFH.
 Fees: Fees shall be charged based on presented study and instalments.
Warba Bank (WB) provides these products to entrepreneurs and family business owners:
(5) Real Estate Ijara Ending with Ownership Transfer
 This product is designed for those entrepreneurs and family business owners,
who are considering investing in real estate sector or a new project or buying a
real estate but need financial support. This product helps them to solve this
problem, where the Bank buys the real estate at the companies’ request then re-
rents to them with an ijara contract ending with ownership transfer.
 The property should be inside Kuwait with an ownership deed transferable in the
name of the bank; Recent assessment of the property by two approved real estate
appraisers; A down payment of not less than 40% (subject to the decision of the
specialised credit committees at the bank); Sources of cash flows and financial
position.

(6) Commodity Murabaha to Finance Operating Expenses

 These products are for those entrepreneurs and family business owners who are
looking for immediate financing to pay their expenses and make their cash
payments needed for their operations. It is based on concluding a commodity
Murabaha transaction to provide liquidity and opening an investment agency
account.

(7) Flexible financing to purchase fixed assets and grow your business
 These products are for those entrepreneurs and family business owners who wish
to buy machines, equipment, production lines, furniture and decoration, or even
lands, factors and offices to develop their projects. This is a suitable product for
professionals, craftsmen, small businesses and individuals who are entrepreneurs
to grow their business and increase their income. Whether entrepreneurs wish to
buy new fixed assets or update their assets that already own, they can choose this
Sharia-compliant solution.
JFBM All Islamic banks in Kuwait offer similar products as these described above. They differ only
in the conditions on which they offer these products to entrepreneurs and family business
owners and required application conditions that should be fulfilled by them.

3. Methodology
In this paper we have used a qualitative methodology considering that this kind of
methodology provides opportunities for a more comprehensive information about the
research topic (Dana and Dana, 2005; Dana and Dumez, 2015). In this paper, following Yin
(2013, p. 4), who noted that “the case study method allows investigators to retain the holistic
and meaningful characteristics of real-life events”, we have used a multiple case study
approach and a snowballing sample (Groenland and Dana, 2020). The interviewed cases are
presented in Table 4. Interviews were realised during April-May 2020 within 24 days, where
the first interview was conducted on April 26, while the last one May 20. Considering that the
COVID-19 situation created several barriers, including face-to-face meetings, for purposes of
this study, the interviews were conducted by email, phone, FaceTime and WhatsApp. The
shortest interview has lasted 17 min, while the longest 36 min.
The interview questionnaire contained the following questions: (1) List five reasons why
you choose to work with this bank?; (2) What kind of products and services provides the bank
to you?; (3) What was/were the reason(s) of using the certain products/services?; (4) Did the

The Founded/ Number of

Family business interviewee Year Sector employees Bank partner

Ultra-Logistics Khaldoun Al- 2019 Transportation 66 Al-Ahli Bank of

KSC Adawi Kuwait
Al Zummorrodah Rishi Jacob 1978 Gold and 45 Al-Ahli Bank of
Jewellery Company Diamond Kuwait
Jewellery
Al Qurain Mona Al- 2008 N/A 2 Al-Ahli Bank of
Moued Kuwait/Burgan
Bank
Sharq Investment Khaled K. 2005 Investments 18 Al-Ahli Bank of
Company Awad Kuwait/ Kuwait
International Bank
Alfa Energy Rishi Jacob 2007 Energy, fuel 8 Al-Ahli Bank of
Company KSC Services Kuwait
Kuwait Business Ahmed Al- 2003 Real Estate 17 Kuwait
Town Real Estate Alqeel International Bank/
Co Al Ahli United
Bank/ Al Ali Bank
National Leasing Hani 2006 Leasing and 50 Warba Bank/ Al-
and Financing Jawabreh Financing Ahli Bank of
Kuwait/ Kuwait
International Bank
NUC National Mohammed 1912 Informal 15 Al-Ahli Bank of
General Trading Suhail Jouni Technology and Kuwait
and Contracting Co Trading
Pronto Wash and Mahdi Hider 2007 Car wash 148 Al-Ahli Bank of
Pronto Valet Kuwait
Table 4. Company
The profile of the United Foodstuff Masoud 1992 Bakery 384 Al-Ahli Bank of
interviewed Kuwaiti Industries Group Akbar Kuwait
family businesses Company KSCC
bank provide the whole amount of your project or only partially? (5) What was the effect of Family
that product to your business? Concrete benefits?! (6) Will you collaborate with this bank in entrepreneurship
the future and in what kind of projects? (7) Do you prefer working with conventional or
Islamic bank? Why? List some reasons, please! (8) Please comment the way of working of
and banking
Islamic banks from your lens! The answers of the interviewed family businesses and their support
discussion are presented in the next section.

4. Findings and discussion

Based on interviews with ten representatives of family business owners in Kuwait, several
answers were received about the main research questions. Their comments and discussions
on these questions are provided below.
RQ1. What kind of products and services provides the bank to family businesses?
Rishi Jacob, the acting CEO of Al Zummorrodah Jewellery Company stated that:
Al-Ahli Bank of Kuwait (ABK) provide wide range of products and services. Al Zummorrodah
Jewellery Company availed Point of Sale (POS) services which helps the company’s customers to
make payments through debit and credit cards instead of cash. Also, another product which the
company availed from ABK is a Web Portal access, which makes customers pay online. ABK offers
us very good and competitive foreign exchange rates for all our international remittances. There are
more services like Online Banking, Corporate Credit Cards, etc., that are provided to our company
Mohamed Suhail from NUC National General Trading and Contracting Co. collaborate with Al-
Ahli Bank of Kuwait. This bank offers to his company these kinds of products and services:
ABK offers to us several products and services, such as customization and security – present the
information access; 24/7 access, servicing through branches, online, mobile access; long-term loans
for business related activities and/or acquisitions; flexibility on issuing Letter of Credits and;
flexibility on issuing Letter of Guarantee.
Mona Al-Moued, the CEO and owner of Al Qurain cooperates with two banks, Al-Ahli Bank
of Kuwait and Burgan Bank. Both of them offer to the company the same products and
services:
They offer to us accounts, medium and long-term loans, short-term credits, time deposits, digital
banking (Internet banking and e-shopping) and payrolls
The other family business owners and/or their representatives provided similar answers
about the products and services received from their partner-banks.
RQ2. What are the reasons of using the certain products/services?
The CFO of Alfa Energy Company, Rishi Jacob, has chosen to work with Al-Ahli Bank of
Kuwait (ABK) for several reasons:
ABK is one of the leading banks in Kuwait and provides a wide range of financial and banking
services; easy access considering that ABK has around 30 branches in Kuwait; they have a highly
successful commercial side, which focuses on financing trade sectors, providing loans, letter of credit
and guarantees and other financing services; The bank’s Treasury and Investments Division
provides effective foreign exchange and interest rate service and advice for the Kuwait, Gulf and
international markets; through its subsidiary, ABK offers asset management, portfolio management,
wealth management etc.
For Ahmed Al-Alqeel, the owner of Kuwait Business Town Real Estate Co. the main reasons
why he chose to cooperate with Kuwait International Bank and Al Ahli United Bank/Al Ali
Bank were the following:
JFBM pricing; meeting the company needs; they provide facilities in local and foreign currencies; long-term
facilities; and their operation in Kuwait and regional markets

RQ3. Whether the family business owners prefer working with conventional or
Islamic bank?
Ultra-Logistics KSC owner, Khaldoun Al-Adawi, who operates in the transportation sector is
open to work with both kind of banks:
We are open to work with both, conventional and Islamic banks. At present, we are dealing with
conventional bank. When the need arises for more complex transactions, loans or other things, we
might use any bank which have the products to cater to our needs
Rishi Jacob, from Alfa Energy Company, prefers to collaborate with conventional banks:
Since we need to cope up with the global standards, we prefer to go with conventional banking
system. It is based on a full-fledged intermediary model that lends borrowers to suppliers and then
loans to companies or individuals
In contrast to him, Hani Jawabreh, the CEO of National Leasing and Financing, prefers to
work with Islamic banks:
Islamic banks. . .because our company’s activities are in compliance with the Islamic Shari’ah
Even that, Kuwait is considered as an Islamic country, from the answers and comments that
were received from our research, we concluded that most of the family businesses cooperate
with conventional banks, instead of Islamic banks. In this regard, Al-Alqeel from Kuwait
Business Town Real Estate, stated that “conventional banks are easier to maintain and to
understand, while the Islamic ones are very complexed, especially with things related to
deferred profits and early settlements”.
RQ4. How the family business owners comment the way of working of Islamic banks
from their lenses?
Regarding this question, Rishi Jacob, the acting CEO of Al Zummorrodah Jewellery Company
stated that:
To say that Islamic banks are different from conventional banks, because the former do not charge
interest is accurate, but it is only the tip of the iceberg. That difference is just one of the many ways
that the fundamentals of Islamic banking differ from these of conventional commercial banking.
Islamic banks operate based on Islamic business laws and regulations, called fiqh-u-muamalat, for
their basic transactions, and they also follow the financial laws and regulations of the countries in
which they operate
Mahdi Hider, the owner of Pronto Wash and Pronto Valet Company stated:
I think that Islamic banks are the same as regular banks, with the difference in fixing the interest
rates in Islamic banks when borrowing and calculating them once in the loan, with the name
“murabaha”. But it is good for that part of the community who does not want to deal with interest,
and I think these banks are the best for them to work with.
Masoud Akbards, the vice-chairman of United Foodstuff Industries Group Company KSCC
regarding this question, said that:
Islamic banks have more secured assets due to high requirements
While, Khaled K. Awad from Sharq Investment Company noted that:
In comparison to conventional banks, Islamic banks tend to get involved more in contracts, which
might delay in releasing funds. . .need faster service
5. Conclusion Family
This paper treated family businesses in Kuwait and their banking support in fulfilment of entrepreneurship
their vision, mission and goals. In the beginning was provided an overview of
entrepreneurship and SMEs in Kuwait, followed by discussion of family businesses and
and banking
their characteristics. The paper continues with banking sector in Kuwait and its contribution support
to the development of family entrepreneurship and small business sector in Kuwait. In this
paper also were discussed the similarities and differences between conventional and Islamic
banking. In the end was provided a description of the most common products of Islamic
banks, designed for supporting of family businesses and SMEs, such as products based on
equity participation – profit and loss sharing (mudaraba and musharaka) and products based
on investment financing – sale and lease contracts (murabaha, ijara, salam and istisna).
Several interviews were realised in order to generate original and primary data about the
banking sector for the family business sector in Kuwait. Initially, it was supposed that most of
the family business owners would prefer Islamic banks as business partners, but our finding
showed that most of them work with conventional banks. The main products and services
that banks offer to Kuwaiti family businesses are the following: banking services in terms of
standard banking, transfers, cheques, receipts; transfer of salaries/payrolls; online services,
short- and long-term loans; overdrafts; letter of credits; letter of guarantees; international fund
transfers, etc. The reasons why they prefer to collaborate with a respective bank are
associated to excellent business relationship with the management, fair charges on products
and services, availability of secured online banking services, fast and high-quality services.
All interviewed family business owners were satisfied from the collaboration with their
banks and would prefer to continue this collaboration in the future.

6. Implications, limitations and future research avenues

This paper is one of the first papers that provide a comprehensive profile of family business in
Kuwait and the support of business sector toward their business activities. In this paper are
offered detailed information of the main banks in Kuwait and their products and services. A
brighter picture on similarities and differences between conventional and Islamic banking is
provided as well. All this will help family business owners to find valuable information on
banking sector and where to address their requests for banking products and services to
support their activities and investments.
As all studies, this paper has its limitations. First, it was focused only in family businesses
and we cannot generalise the outcomes from this study for all businesses that operate in
Kuwait. Second, the number of interviewed family businesses is very limited, only ten, and we
afraid that this number is sufficient to come to some reliable conclusions. These limitations
may present as future research avenues in order to generate more reliable data for the family
business sector in Kuwait and the support they receive from the banks in this country.

Notes
1. In this link can be found an interesting discussion among scholars on this topic: https://www.
researchgate.net/post/Can_Islamic_banks_ever_be_Islamic
2. All information is taken from the banks’ websites.

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Corresponding author
Nour Mahdi Abdullah can be contacted at: ak.noor0320@gmail.com; nourmahdi1996@hotmail.com

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