We consider Islamic finance to have great potential to advance further in Europe. Over the years, Europe has carried out profitable Islamic finance operations in its areas. Here we pick up three European countries that have adopted Islamic Finance in their finance industry.
Islamic Finance in France
The French authorities strongly support the development of Islamic finance in France. In 2007, the Paris EUROPLACE organization, a promoter of the city’s role as a financial center, established the Islamic Finance Commission. Since then, the regulator of French financial markets, the Autorité des marchés financiers (AMF), has issued Islamic investment funds and Sukuk listings. Moreover, the Paris stock exchange has developed a Sukuk segment and four tax regulations (relating to Murabaha, Sukuk, ijarah, and istisna’).
In June 2011, France authorities introduced the first Islamic deposit scheme operated via the Shariah-compliant window of traditional banks. Following this successful step, they introduced an Islamic home financing product, a 10-year Murabaha contract. The individuals have welcomed it as there is strong demand. Because home financing has been a critical need of French retail clients.
Currently, France market possesses six Islamic funds with total assets under management of USD 147.2 million.
All the time, France has set up good trade flows with its neighbors with large Muslim populations. Certainly, a substantial proportion of French comes from North Africa, and this has been increasing domestic demand for Islamic finance.
Islamic Finance in Germany
Germany has the largest economy and largest Muslim population (4.1 million people, against 2.9 million in the UK) in Europe. It was the first Western country to tap the Islamic capital market when Saxony-Anhalt state issued its first Islamic bond (Sukuk) in 2004. In 2009, Germany’s Federal Financial Supervisory Authority (BaFin) started to conduct Islamic banking operations.
The German Financial market has also accepted the offering of a new Shari’ah-compliant investment product benchmarked to the WestLB Islamic Deutschland Index. This consisted of shares in ten German firms whose business activities were built according to Shari’ah. Financial institutions in Germany also actively engage in the Islamic finance industry via their subsidiaries in Dubai, London, and Kuala Lumpur. These institutions could have a dominant role in attracting Islamic funds to Germany via their well-established networks and expertise.
Islamic Finance in Italy
Italian authorities also have taken several initiatives to improve the situations related to Islamic finance. For instance, the Banca d’Italia has hosted several conferences on Islamic Finance. ABI, the Italian Banking Association, is managing a working group related to the issuance of a corporate or sovereign Sukuk.
Market forecasts show that Islamic retail banking deposits among Italy’s Muslim population could reach USD 5.8 billion. And they generate revenues of USD 218.6 million by 2015. These figures may increase to USD 33.4 billion and USD 1.2 billion accordingly by 2050. Simultaneously, local banks have made serious efforts to set up a working group to introduce Shari’ah-compliant home finance products.
Furthermore, in the wholesale banking area, some Italian institutions operate actively in the Islamic capital market. Mostly they are active in terms of trade finance, and murabaha via foreign offices or wholly-owned foreign subsidiaries.
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