Islamic finance on the advance in Europe
October 02 2018 11:38 PM
The newly-built DITIB central mosque in Cologne, western Germany, is pictured during its official opening on September 29. Germany, home to one quarter of Europe’s 20mn Muslims, also had several sukuk issuances over the past decade.

By Arno Maierbrugger Gulf Times Correspondent Bangkok

Latest developments show that Europe is increasingly embracing Islamic finance to an extent that the industry is gradually becoming more influential within the continent’s banking sector. Gulf Times reported last week about the growing potential Islamic finance is gaining on the Balkans, namely in Bosnia and Herzegovina, and this time it is the foray of Al Baraka Banking Group, which through its Turkish subsidiary Al Baraka Turk, launched a digital-only Islamic bank in Germany under the name of “insha,” according to a September 30 press release of the Istanbul-based Islamic lender.
Developed in partnership with Berlin-based fintech solarisBank AG, “insha” is a completely digital banking service which will as a first provide digital participation banking services in Germany, then throughout Europe.
“We are very happy to commission insha for the first time in Germany. We aim to provide convenience to Turkish citizens and other Muslim communities in Germany with a complete experience of branch-free and digital banking services,” Al Baraka Turk general manager Meliksah Utku said.
The service is the second foray of an Islamic bank in Germany, following the launch of a fully-fledged Islamic banking arm of Istanbul-based Kuveyt Turk Participation Bank three years ago with branches in Frankfurt, Mannheim, Berlin and Cologne doing business under the name of KT Bank.
Germany, home to one quarter of Europe’s 20mn Muslims, also had several sukuk issuances over the past decade.
However, the UK remains Europe’s hub for Islamic finance, having started early to adopt Shariah-compliant banking to reach out to the many local Muslim communities. London has now grown to a hub for Islamic finance in the Western world with currently five licensed Islamic banks and about two dozens of conventional banks offering Islamic windows.
Shariah-compliant assets in the UK are estimated at around $700mn, and the London Stock Exchange is currently listing close to 70 sukuk.
That said, Ireland is growing in popularity for Islamic finance players, partly because of uncertainty about the future of London as a banking hub after Brexit. In April last year, Saudi Arabia listed the world’s largest ever sukuk at that time through two listings on the main securities market of the Irish Stock Exchange in Dublin, raising a total of $9bn.
Back in March this year, another Islamic bond was issued by an Irish special purpose company which raised more than $150mn, only to be followed by a $600mn-sukuk by Emirates airline in a co-listing in Dublin and Dubai, and another such double-listed sukuk by Dubai Islamic Bank at a volume of $1bn.
Ireland is competing with Luxembourg in its effort to reach out to Islamic bond listings. The small nation known for its liquid financial market was the first eurozone country to issue a sovereign sukuk on its own and – since venturing into the Islamic finance business in 2002 – so far has around 50 Shariah-compliant fund listings and is also actively seeking to attract Islamic fintechs.
While Islamic finance in terms of overall assets under management still remains a niche in Luxembourg’s banking industry, the country gained a reputation of being one of Europe’s most prominent centres for Shariah-compliant securities with the advantage of having all the infrastructure and legal structures in place, ensuring investor protection and being open to innovation.
One country that cannot be missed as a financial hub in Europe is of course Switzerland. Having started with Islamic banking windows more than a decade ago, the country’s financial industry over time moved on to Islamic insurance, or takaful, and is also promoting sukuk and halal microfinance, as well as Islamic finance skills training. Currently, there are a number of fully-fledged Islamic banks operating in the country, including Arab Bank Switzerland and Habib Bank Zurich.
Interestingly, France – a country with the largest Muslim population in Europe of about 6mn – has still to catch up on Islamic finance as there are only a few Islamic players in the banking and insurance market there due to a lack of legal and fiscal certainty for Islamic finance products.

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