Article 3 of the Saudi Finance Companies Control Law
المادة 3 من نظام مراقبة شركات التمويل
The article requires licensed finance companies to carry on finance in a way that does not conflict with Islamic Sharia, according to Sharia committees they choose, and without undermining the soundness of the financial system and fairness of dealings.
Official text (Arabic)
This article has not been amended since the law was issued.
تزاول الشركات - المرخص لها بموجب هذا النظام - أعمال التمويل بما لا يتعارض مع أحكام الشريعة الإسلامية، بناءً على ما تقرره لجان شرعية تختار أعضاءها تلك الشركات، وبما لا يخل بسلامة النظام المالي وعدالة التعاملات.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 3 explained in plain English
This article sets three general controls for the work of finance companies licensed under the Law:
- No conflict with the provisions of Islamic Sharia: the finance business the company carries on must not conflict with Sharia.
- Sharia committees: this is determined on the basis of what Sharia committees decide, and the companies themselves choose the members of these committees.
- Soundness of the financial system and fairness of dealings: finance business must not undermine the stability of the financial system, nor fairness in dealing with customers.
This means that when a customer deals with a licensed finance company he is dealing with products that are presumed to have been subject to the opinion of a Sharia committee affiliated with the company. The article did not specify how these committees work or the conditions for their members, but left their selection to the companies.
This article is preceded by Article 2, which provides that the Law applies to licensed companies, and followed by Article 4, which prohibits carrying on finance activities without a license.
If you have an inquiry about whether a particular finance contract is consistent with these controls, you can consult a lawyer who specializes in banking and finance.
Practical example
A finance company in Jeddah wanted to launch a new car-finance product, so it presented the contract structure to the Sharia committee whose members the company had chosen, to make sure it did not conflict with the provisions of Islamic Sharia, taking care that it did not contain terms that undermine fairness in dealing with customers.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 3 of the Saudi Finance Companies Control Law
Must finance companies comply with Sharia?
Yes. Licensed companies carry on finance business in a way that does not conflict with the provisions of Islamic Sharia.
Who chooses the members of a finance company's Sharia committee?
The companies themselves choose the members of their Sharia committees.
Is Sharia compliance alone enough?
No. The article also requires that finance business not undermine the soundness of the financial system and fairness of dealings.
More articles on Definitions and Scope of the Finance Law
- Article 1
The article defines the key terms in the Finance Companies Control Law, such as finance company, beneficiary, consumer, license and finance.
يقصد بالألفاظ والعبارات الآتية - أينما وردت في هذا النظام - المعاني المبينة أمام كل منها، ما لم يقتضِ السياق خلاف ذلك: النظام : نظام مراقبة شركات التمويل. اللائ
- Article 2
The article defines the scope of the Law: it applies to finance companies licensed under its provisions.
يسري هذا النظام على شركات التمويل التي يرخص لها وفقاً لأحكامه.
- Article 36
The article gives companies and entities that carried on finance in the Kingdom before the Law took effect a two-year period to regularize their status in line with its provisions.
تمنح الشركات والمؤسسات العاملة التي تزاول نشاط التمويل في المملكة قبل سريان هذا النظام مهلة سنتين لتسوية أوضاعها وفق أحكام هذا النظام.
- Article 37
The article makes the Zakat and Income Authority the body that issues the criteria needed to calculate the zakat base of finance companies.
تصدر مصلحة الزكاة والدخل المعايير اللازمة لاحتساب الوعاء الزكوي لشركات التمويل.
- Article 38
The article provides that the Finance Companies Control Law repeals any provisions that conflict with it.
يلغي هذا النظام كل ما يتعارض معه من أحكام.
- Article 39
The article requires the Governor to issue the Implementing Regulations within ninety days of the date the Law is issued, to be applied after the Law takes effect.
يصدر المحافظ اللائحة خلال تسعين يوماً من تاريخ صدور النظام، ويعمل بها بعد نفاذه.
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.