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Kuwait - Banking

Kuwait has one of the region’s oldest and most developed financial services industries, having started in 1941 with British investors setting up the first national bank. There are now eleven domestic commercial banks in Kuwait, which include five Islamic banks and the National Bank of Kuwait which is the largest bank in the state. Twelve foreign banks have been established in Kuwait following a law amendment which allowed this to happen. All banks fall under the supervision of the Kuwait Central Bank.

The government in Kuwait established the Kuwait Currency Board in 1960, which launched the Kuwaiti dinar the following year. A new Kuwaiti dinar was launched following the 1990 Gulf War, so that stolen currency became invalid.

The Kuwaiti dinar is today the world’s highest valued unit of currency. It is divided into 1,000 fils. The legal tender consists of notes in ¼ dinar, ½ dinar, 1 dinar, 5 dinars, 10 dinars and 20 dinars. Coins are available in 5, 10, 20, 50 and 100 fils.

ATMs are plentiful and available 24 hours a day. Be careful to check the charges that may be attached to your card if it if the ATM does not belong to the same financial institution that issued your card.

US dollars and British pounds are easy to exchange at the banks. Although banks will have varied hours, most will be open from 8am to 3pm from Sunday to Thursday. They will be closed on Friday and Saturday.

It is common for banks in Kuwait to offer a chip and pin debit or credit card connecting to the VISA or Mastercard system, and the cards are widely accepted in hotels, restaurants and shopping malls. Many businesses will add a 2% charge to the cost of the goods if you pay by credit card, so it is best to ask about this before making payment. However, some retailers offer a discount to customers using a specific bank’s debit card.

The economy in Kuwait is reliant on its oil industry, which has faced major challenges since the 2014 decline in oil prices. The oil industry provides 80% of the government’s income, while low energy prices and the oil companies boost the private sector earnings. The government’s determination to diversify the economy is at the heart of its recent education reforms.

The Kuwait Stock Exchange was established in 1983. It followed the collapse of the informal Souk Al Manakh stock exchange, where total debts of $26bn meant all but one financial institution in the state became insolvent.

The 1990 Gulf War was the next big shock to the financial system. Part of the post war recovery included recapitalisation of banks, establishment of a new Kuwait dinar, and invalidating stolen currency.

The banking sector in Kuwait was impacted by the 2007-08 global economic crisis, and in response the Central Bank of Kuwait and other institutions tightened up the regulatory framework under the Capital Markets Law. Some of these laws have been relaxed as the banks expanded their asset base and increased lending, but the capital markets sector remains under the vigilance of the Capital Markets Authority and a revised corporate governance law was implemented in 2013. By law, banks were required to improve their financial reporting and to invest in their risk management departments.

Kuwait signed a tax compliance agreement with the US in April 2015. Laws passed in the US required foreign banks to identify accounts controlled by US citizens, green card holders and US owned companies, and pass the details to the US Inland Revenue Agency (IRS). This was to ensure US individuals, regardless of where they live, correctly declare all their global earnings and assets. The agreement between Kuwait and the US means the Ministry of Finance will receive relevant account details from all the banks in Kuwait, and will pass these to the US IRS.

The domestic banks in Kuwait include the National Bank of Kuwait, KFH (the largest Islamic financial institution in the world), Burgan Bank, and Gulf Bank.

The current account, or cheque account, will normally be offered with the range of services expected in the US and UK. A chip and pin debit or ATM card, online banking services, standing orders and regular statements would form part of an essential account package. Unlike some European countries, cheques are still used in Kuwait, so banks offer cheque books with these accounts.

Most banks will only allow their accounts to be opened by individuals meeting a minimum income level. This will be clearly set out in their terms and conditions. If you are earning a high income, you may be offered a premium account, which will have a number of specified perks attached.

Some banks offer tailored services to expats. These can provide additional benefits such as free online money transfers to your home country and free travel insurance. Website information, as well as branch and telephone services, will be available in English. Banks frequently offer some accounts only to Kuwait’s citizens and others are designated for expats.

Accounts can often be opened using just your civil identification. The address you use must be correct as all correspondence will be sent there.

Banks offer a range of savings products. A savings account will be held in Kuwaiti dinars, often with interest accrued monthly but paid quarterly. There will often be a minimum deposit balance which must be maintained to accrue interest without penalty. There may be penalties for withdrawing some of the funds before a specified date. The terms and conditions for the account should be shown clearly on the website and in the notes which accompany an application form.

If you need to borrow money while you are living in Kuwait, many banks will be happy to make a loan subject to your income level and credit history. The terms of use, including the maximum amount permitted and the maximum term for repayment, can be found clearly stated on bank websites. The most recent banking regulations brought in a number of issues for expats arranging loans. Certain types of loan now require evidence of the purchase made using the loan facility, and for that to be provided within six months. That means people can no longer borrow money to spend how they like, but just for a specific, documented reason.

Asset management services are available via the banks in Kuwait. However, be aware that they will be selling their own products or those of business partners, and this may not be the right choice for you and your circumstances. Ensure you visit at least two or three providers before committing your funds.

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