1. Shariah Supervisory Board
Livo Bank's Shariah Supervisory Board (SSB) is an independent body responsible for ensuring the Bank's compliance with Islamic Shariah principles. The SSB provides guidance on all Shariah-related matters and issues fatwas (rulings) on the permissibility of the Bank's products and services.
Board Composition
- Chairman: Dr. Saad bin Nasser AlShathri
- Vice Chairman: Dr. Abdullah bin Muhammad Al-Faqih
- Member: Dr. Mohammed bin Abdulaziz Al-Othaim
- Member: Dr. Saad bin Saud Al-Qahtani
Responsibilities
- Review and approve all banking products and services for Shariah compliance
- Issue fatwas on Shariah matters referred by the Bank
- Conduct annual Shariah audit of the Bank's operations
- Advise management on Shariah-related matters
- Ensure compliance with AAOIFI Shariah Standards
- Report to shareholders on Shariah compliance status
2. Islamic Banking Products
Livo Bank offers a range of Shariah-compliant products based on the following Islamic finance contracts:
2.1 Murabaha (Cost-Plus Sale)
Murabaha is a sale transaction where Livo Bank purchases an asset at the request of the customer and sells it to the customer at a disclosed cost plus a marked-up profit margin. The payment may be made in installments over an agreed period. This is the most commonly used financing structure for personal finance, auto finance, and trade finance.
- The asset must be owned by Livo Bank before the sale to the customer
- The cost and profit margin must be clearly disclosed
- Payment terms are agreed upon at the time of the contract
2.2 Ijara (Leasing)
Ijara is a lease contract where Livo Bank purchases an asset and leases it to the customer for an agreed period and rental payments. At the end of the lease term, ownership may be transferred to the customer (Ijara wa Iqtina) or the asset may be returned to Livo Bank. This structure is used primarily for home finance and equipment financing.
2.3 Musharaka (Partnership)
Musharaka is a partnership contract where two or more parties contribute capital to a joint venture. Profits are shared according to a pre-agreed ratio, while losses are shared in proportion to the capital contribution. This structure is used for project finance and investment products.
2.4 Wadiah (Safekeeping)
Wadiah is a safekeeping contract where Livo Bank holds deposits on behalf of customers as a trust. The Bank guarantees the return of the principal amount and may offer a voluntary gift (Hiba) as a return on the deposit. This is the basis for current accounts and demand deposits.
2.5 Mudaraba (Profit-Sharing)
Mudaraba is a partnership where one party (the provider of capital, i.e., the customer) entrusts funds to another party (the manager, i.e., Livo Bank) for investment. Profits are shared according to a pre-agreed ratio, while losses borne by the capital provider (except in case of negligence). This structure is used for savings and investment accounts.
2.6 Sukuk (Islamic Bonds)
Sukuk are Islamic financial certificates representing undivided ownership in underlying assets. Livo Bank issues and deals in various types of Sukuk, including:
- Sukuk Murabaha: Based on cost-plus sale contracts
- Sukuk Ijara: Based on leasing contracts
- Sukuk Wakala: Based on agency contracts
- Sukuk Istisna'a: Based on manufacturing/construction contracts
3. Profit Rate Calculation
Livo Bank's profit rates on Islamic products are determined based on:
- The cost of funds and the prevailing market rates
- The Shariah Supervisory Board's approval of the profit rate structure
- Transparent disclosure of the profit rate and its calculation methodology
- Compliance with AAOIFI Shariah Standards
For Murabaha and Ijara products, the profit rate is fixed at the time of the contract and remains constant throughout the financing period. For Mudaraba savings products, the profit rate is variable and declared at the end of each profit distribution period.
4. Prohibited Activities
In accordance with Islamic Shariah, the following activities are strictly prohibited:
- Riba (Interest/Usury)
- The charging or paying of interest on loans or deposits. All Livo Bank products are structured to avoid any form of riba.
- Maisir (Gambling)
- Any transaction involving excessive uncertainty, speculation, or gambling. The Bank does not engage in speculative trading.
- Gharar (Excessive Uncertainty)
- Transactions with excessive ambiguity or uncertainty in their terms and conditions. Livo Bank ensures all contracts are clear and well-defined.
- Investment in Prohibited Industries
- The Bank does not finance or invest in businesses involved in alcohol, pork products, gambling, tobacco, weapons, or other activities prohibited under Islamic Shariah.
5. Zakat Calculation
Livo Bank facilitates Zakat calculation for its customers through:
- Providing account balance information for Zakat calculation purposes
- Offering Zakat advisory services through the Islamic Banking division
- Calculating and distributing the Bank's own Zakat obligation annually
- Providing Zakat calculators and educational materials on the Bank's digital channels
Livo Bank's Zakat is calculated in accordance with the Zakat, Tax and Customs Authority (ZATCA) guidelines and Shariah principles, at a rate of 2.5% on net eligible assets.
6. Takaful (Islamic Insurance)
Livo Bank offers Takaful products as an alternative to conventional insurance, based on the principle of mutual cooperation and shared responsibility:
- Family Takaful: Providing financial protection for families in the event of death, disability, or critical illness
- General Takaful: Covering assets and liabilities against various risks
- Health Takaful: Covering medical expenses for individuals and families
Takaful operates on the principle of Tabarru' (voluntary contribution), where participants contribute to a pooled fund that is used to compensate members who suffer a covered loss.
7. Annual Shariah Audit
Livo Bank undergoes an annual Shariah audit conducted by the Shariah Supervisory Board or an independent Shariah auditor appointed by the Board. The audit covers:
- Review of all financing and investment products for Shariah compliance
- Examination of income sources to identify any non-compliant (impermissible) income
- Verification of purification of impermissible income through charitable donations
- Assessment of Shariah governance framework
- Review of marketing materials and product documentation
- Compliance with AAOIFI Shariah Standards
The Shariah audit report is presented to the Board of Directors and is made available to shareholders as part of the Bank's annual report.
8. AAOIFI Compliance
Livo Bank's Islamic banking operations are aligned with the standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), including:
- AAOIFI Shariah Standards (21 standards covering various financial transactions)
- AAOIFI Accounting Standards for Islamic financial institutions
- AAOIFI Governance Standards
- AAOIFI Ethical Standards
Livo Bank regularly reviews its products and operations against AAOIFI standards and implements any necessary changes to maintain compliance.