Ndoye Islamic Finance in Europe

Products and Services
1. Auflage 2019
ISBN: 978-1-5439-8998-4
Verlag: BookBaby
Format: EPUB
Kopierschutz: Adobe DRM (»Systemvoraussetzungen)

E-Book, Englisch, 130 Seiten

'We will adapt our legal environment so that the stability and innovation of our financial center can benefit Islamic finance.' These words of Christine Lagarde, former French Minister of Economy, Industry, and Employment reflect Islamic finance interest today in European countries. This type of finance could yield ? 100 million millions for France as indicated by the report of Jouini-Pastré (2008) entitled 'Challenges and opportunities of the development of Islamic finance for the Paris financial centre: Ten proposals to collect ? 100 million millions'. We could have been spared the subprime crisis as well as the sovereign debt crisis in Europe and the exacerbated volatility of the financial markets, of commodities and of foodstuffs would have been significantly reduced if Western countries had been inspired somewhat by the spirit of Islamic finance. The first part of this book is a reminder of the different stakes of Islamic finance for European states in a global post-financial crisis context. A second part will try following a chronological study to draw up an inventory of Islamic finance in Europe through the study of different leading countries on the subject: the case of the United Kingdom, the case of Turkey, the case of Germany and the case of France, without forgetting other European Union countries. Finally, the third part will focus on the supply of products and services in a market whose growth potential is still very untapped considering current innovation wave in the field of islamic finance fintech, blockchain and cryptocurrencies.

Autoren/Hrsg.

Ndoye, Djibril

Leseproben

2. State of Islamic finance in Europe

2.1. The boom of Islamic finance and its integration into global finance

All observers agree that since the emergence of modern Islamic finance in the Middle East in the mid-1970s, it has been taking a growing share in global finance.

However, it is difficult to assess the exact size of the market. The World Bank estimated the value of assets of Islamic finance institutions at US $ 100 million millions in 2000, which represented, by comparison, almost a quarter of the debt of developing countries. Several authors, as S. Cox23 or M. Koutouziz24, put forward the figure of US $ 150 million millions for the year 2000, against US $ 70 million millions in 1980.

In 2009, Islamic finance was estimated to represent an amount of assets of about US $ 700 million millions and its annual growth was estimated between 15 and 30% depending on the type of assets. At the end of 2018, Islamic Finance assets worldwide were estimated at US $ 2,400 million millions.

Numerous innovations in financial products have made it possible to integrate the ethical dimension. The growing savings capacity of oil-exporting countries, as a result of the recent surge in oil prices, has exacerbated competition among the world‘s financial centres to attract capital. This was reinforced after 11 September 2001 and the political tensions in the Middle East by the willingness of Muslim countries to repatriate their capital to Muslim countries or to turn to European countries rather than to the United States. The rising savings rate of emerging countries, especially oil exporters, has led to capital accumulation in these countries. Just recently, the financial crisis has given new vigor to the argument on the need to moralize capitalism: Islamic finance can appear as a means of integrating the ethical dimension.

2.2. United Kingdom: Pioneer in Northern Europe

The UK is the most developed Islamic financial market in Europe. Built on a dual model, it has five fully Islamic banks: the Al Rayan Bank (formerly Islamic Bank of Britain (IBB)), the only retail bank; the European Islamic Investment Bank (EIIB); the Bank of London and the Middle East (BLME); the European Finance House; and the Gatehouse Bank. Furthermore, there are Islamic branches of conventional banks such as HSBC. Currently, five fully sharia-compliant banks are domiciled on the UK territory and twenty institutions (including fifteen conventional banks) offer sharia-compliant services. UK advertises itself as “the leading Western centre for Islamic finance” (The City UK, 2015). Since 2007, the Sukuk market has been growing and Sukuk are listed on the London Stock Exchange, which, according to the UK government, is “a key global venue” for its issuance (UK Embassy, 2016: 8). On 9 August 2004, the first Islamic bank was established. The annual issuance of Sukuk increased seven-fold between 2004 and 2007, from US $ 5 million to US $ 35 million a year; the total number of Sukuk issued is estimated to reach nearly £ 7,000 million by early 2009. The UK is becoming the leading Islamic finance market in the West, far ahead of the United States, both in investment banking and retail banking, able to challenge Malaysia’s supremacy in Sukuk issuance in the future.

In 2014, the UK government issued a sovereign Sukuk, the first one ever by a Western government. One year later, the UK’s export credit guarantee department helped finance the purchase of 4 Airbus A380 aircraft by Emirates Airlines by providing a guarantee for a USD 913 million Sukuk issued for this purpose (British Embassy Bishnek, 2016: 4-5). Sharia-compliant investments in UK include the Olympic Park, the Shard, and Battersea redevelopment, as well as planned social housing scheme by a Kuwaiti Sharia-compliant bank.

Figure 10: Islamic Banks in Western Countries25

Several factors explain Londons’s position in the Islamic financial market:

• A public will and a very favourable attitude of the public authorities towards the development of the Islamic financial sector: In 2001, the Central Bank of England has created a working group on Islamic finance; in 2006, the Treasury set up a second working group and the Minister of Finance announced on 13 June 2006 the government‘s desire to transform London into “the world‘s leading Islamic finance centre”; the FSA (Financial Services Authority) promoted the establishment of Islamic banks in exchange for a requirement for good management, control of resources and transparency of intentions.26
• Legal and tax adjustments have been made: since 2003, the double taxation on Murabaha transactions (purchase and then resale of property) was abolished, which improved the price competitiveness of Islamic financing operations compared to classic borrowing; in 2006, the double stamp duty on Islamic real estate loans was abolished; Sukuk issuance rules are now aligned with those of conventional bonds.
• With its 3 million Muslim residents, with a significant purchasing power from Pakistan, the Middle East and countries that are more familiar with Islamic finance than North Africa, for example, the UK has a significant potential market for Islamic financing in the real estate sector. In April 2007, Home Purchase Plans were put in place to guarantee Muslim borrowers protection equivalent to that of traditional borrowers.
• Thanks to the European passport, London is a strategic base for Islamic banks, which would like to penetrate the European market of other countries, such as France, for example.
• Lastly, let us quote the legendary skills and the innovative capacity of the professionals of the City of London in the field of finance as a key asset for the establishment of any bank, Islamic or not.

  2.2.1. New actors of Islamic finance in the United Kingdom

  2.2.1.1. InsureHalal – Shari‘a compliant insurance

In 2018 InsureHalal has partnered with Now4Cover to launch a Shari‘a compliant home insurance policy for landlords.

InsureHalal has launched what it claims is the UK’s first Shari‘a compliant home and landlord insurance policy in collaboration with Now4Cover.

While other companies offer halal insurance products, InsureHalal says it is the first to offer Shari‘a compliant home and landlord insurance.

InsureHalal said it is also trying to pioneer the use of innovative FinTech in Islamic financial services. Now4Cover will build and manage the technology platform.

The product is Shari‘a certified by Mufti Muhammad Nurullah Shikder, and Sheikh Salman Badr Al-Hasan, who is the chairman of InsureHalal.

He said: “We don’t believe people should pay more just because a product is halal. We are pleased to bring an insurance product that is not only halal but also fairly priced, ethical, and socially responsible.”

InsureHalal says it does not make any money from refusing claims. It takes a management fee, and the rest goes towards paying claims. Also, InsureHalal does not charge policyholders to change or cancel their policies. It also claims that most of any surpluses are applied for the benefit of customers or donated to charitable causes.

“This is an important milestone in the UK. Insurance is a necessity, and Muslims like everyone else need to protect themselves and their families. It is important that they can do this without compromising their faith.”, said Faizal Karbani, chief executive of InsureHalal.

InsureHalal has launched the policy with a plan to extend further by providing more halal insurance products such as travel, Mosque, and business insurance to UK customers in the future.

2.2.1.2. Simply Ethical – Ethical and Shari’a compliant

Simply Ethical was founded in 2010 with the core objective of helping UK Muslims achieve Shari‘a compliance in their financial affairs - be it saving for their children’s future, buying a house or saving for retirement. It is a financial services firm authorized and regulated by the Financial Conduct Authority. The team is dedicated to offering ethical and Shari‘a compliant investments and pension solutions for private, corporate, and intermediary clients.

Simply Ethical was named the winner of Islamic Finance Firm of the Year - UK in Finance Monthly Magazine M&A Awards 2014.

2.2.1.3. Yielders – Property crowdfunding investment platform

Yielders Ltd is a Shari‘a compliant FinTech that provides an online crowdfunding...