XXI Economic Forum Krynica Zdrój, Poland 7-9 September, 2011 “The role of Islamic Finance in...
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Transcript of XXI Economic Forum Krynica Zdrój, Poland 7-9 September, 2011 “The role of Islamic Finance in...
XXI Economic Forum
Krynica Zdrój, Poland7-9 September, 2011
“The role of Islamic Finance in Tackling Financial Exclusion in the EU”
Alberto G Brugnoniwww.assaif.org
the state of Islamic Finance in the world
IF in the EU: the underpinnings and the reality
some reports on immigrations, social cohesion issues and IF
an assumption worth exploring
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PS: The Mediterranean Partnership Fund
Summary
The state of Islamic Finance in the world
ISLAMIC FINANCE BY COUNTRYBanking, Takaful & fund assets, USDbn, end-2007 & end-2008
Country Total 2007 Total 2008 Banks Takaful Others n° of firms*
Iran 235.3 293.2 290.6 2.6 --- 23
S. Arabia 92.0 127.9 127.1 0.8 --- 20
Malaysia 67.1 86.5 84.4 2.1 --- 37
UAE 49.1 84.0 83.0 1.0 --- 18
Kuwait 63.1 67.6 57.4 0.2 10.0 30
Bahrain 37.4 46.2 44.2 0.4 1.6 34
Qatar 21.0 27.5 25.3 0.4 1.8 16
UK 18.1 19.4 19.4 --- --- 6Turkey 15.8 17.8 17.8 --- --- 4
Bangladesh 5.7 7.5 7.5 --- --- 15
Sudan 5.3 7.2 7.0 0.2 --- 22
Egypt 5.7 6.3 6.3 --- --- 3
Pakistan 6.3 5.1 5.1 --- --- 18
Jordan 3.3 4.6 4.5 --- 0.1 6
Syria 0.6 3.8 3.8 --- --- 2
Iraq --- 3.8 3.8 --- --- 1
Indonesia 3.4 3.4 3.2 0.2 --- 20
Brunei 2.7 3.2 3.2 --- --- 1
Others 7.2 7.1 6.5 0.4 0.2 26
Total 639.1 822.1 800.1 8.3 13.7 302
*Includes only those firms submitting data to survey – Source: the Banker
• not a new phenomenon: Islamic finance in the West is at least a 40-year old story!
• demand for Islamic products has been growing steadily: it is a value added proposition
• common issues but national approaches to Islamic Finance
The state of Islamic Finance in the world
1970s
commercial banking
1980s
commercial banking
project finance & syndications
1990s
commercial banking
project finance & syndications
equity Ijarah
2000s
commercial banking
project finance & syndications
Equity Ijarah sukuk al ijarah structured
alternative assets
2005+
commercial banking
project finance & syndications
equity Ijarah sukuk al ijarah structured
alternative assets liquidity
management tools
an historical perspective: is the IF the continuation of a millennium-long wave?
a new phenomenon: the emergence of the demand of religious-based finance in non-Muslim countries
reasons for the awakening of this demand- growth of a Muslim affluent middle class- growing interest in halal finance products observed
among non-Muslims- governments’ policy shifts- Islamic finance as a lucrative business opportunity United Kingdom, France, Germany, Luxembourg,
Italy, Malta ... are all proactively fostering only capital market and investment banking activities
IF in the EU: the underpinnings and the reality
How it happened and who made it possible? The Central Banker (Eddy George), professionals and civil society got together
Why it happened? Foreign policy, business interest, financial inclusion
The concept of a ‘level playing field’ is not a religious one: the world Islam is never used. The official documentation speaks of alternative finance
A progressive legal and regulatory adjustment in every annual Financial Act
Support for Islamic Finance transcends political allegiances
Five fully Shariah-compliant banks, twenty-two windows, one Takaful company, twenty Sukuk (USD11bln) listed, seven Shariah-compliant ETFs and twenty law firms supplying services in Islamic finance
Is it all pink and rosy ? Sovereign Sukuk put on hold
Country analysis: the United Kingdom
The largest European Muslim population: > seven million mainly from North Africa
French banks have been world players in Sukuk structuring and ETF for a while but offering their services from the GCC countries
A story of competition with London: the role of Paris-Europlace and the ‘Rapport Pastré’ (only in 2008). Stakeholders not really involved
Common law versus civil code: adjustments are more difficult yet feasible. New instructions to accommodate Sukuk issuance by French corporate through the establishment of la fiducie (trust law)
Establishment of one strong relationship with Qatar and Qatar Islamic Bank
Retail products have been tested in the overseas départements (Réunion island) but not marketed in the mainland. Why ?
Sovereign Sukuk has been shelved for the time being
Country analysis: France
The second largest Muslim population in the EU: > 5 million almost all Turks
Universal banks have been key players in Sukuk structuring (Deutsche Bank and WestLB in particular) since 2002
Issued the only European quasi-sovereign Sukuk in 2004: USD 100m of Saxe-Anhalt
Is a lead player in Re-Takaful mainly from Kuala Lumpur (Hannover-Re and Munich- Re)
Has recently start issuing Islamic banking licences to German offices of Turkish participatory banks (Kuveyt Türk Participation Bank)
Country analysis: Germany
One of the oldest track record in Islamic finance in the EU: 1st Islamic finance institution in 1978, 1st Shariah-compliant insurance company in 1983, 1st European exchange to list a Sukuk
Islamic finance is clearly a tool of foreign/commercial policy: the Central Bank is the only Western regulator to be a member of the Islamic Finance Service Board, the government has opened a rep-office in Dubai ...
It ranks 4th in the world as a domicile for Shariah-compliant investment funds and 1st for non-Muslim countries
Is amongst the top four exchanges for Sukuk listing (16 issues)
It has been chosen by a number of Sovereign Wealth Funds as the domicile for their international investment structures
Country analysis: Luxembourg
A large Muslim population (circa 1.4m) but above all 1st trading partner in several sectors with the GCC and MENA countries
A growing attention of the institutional and regulatory authorities: Central Bank, Ministry of Foreign Affairs, Italian Banking Association
An assertive support from the Vatican and the ethical finance community
A centuries-old tradition of mutuality and cooperative finance and insurance
Italian banks starting to participate in Islamic syndicate financing and Islamic project financing
Major halal initiative underway
Country analysis: Italy
Dubbed the Bahrain of the Mediterranean Sea
Malta Financial Services Authority has recently issued a “guidance note” on Shariah-compliant funds
The Bank of Valletta is developing a Shariah-compliant fund eyeing the Italian Market
Some Shariah-compliant products are already possible through the Trust and Trustees Act and the Venture Capital Act
Takaful is possible as Malta is the only EU country that has enacted the Protected Cell Companies legislation
Albaraka and Deutsche Gulf Finance have recently incorporated the ‘World Institute for Islamic Finance’ based in Malta
Country analysis: Malta
"Islamophobia and progressive values", The Institute of Race Relations, London, March 2011
"Integration, Islamophobia and civil rights in Europe”, The Institute of Race Relations, London, 2008
"Muslims in the European Union: Discrimination and Islamophobia", European Monitoring Centre on Racism and Xenophobia, 2006
"Muslims in Europe: Integration Policies in Selected Countries", Congressional Research Service - The Library of Congress, November 18, 2005
M. Fahim Khan, Mario Porzio, "Islamic Banking and Finance in the European Union: A Challenge" , Edward Elgar Pub, 2010
Some reports on immigrations, social cohesion issues and IF
the existence of Islamic intermediaries is suitable as it:
– will have positive effects on European integration
– makes the industry more inclusive
– increases the competition among the stand-still operators
– fosters the ethical dimension of banking and finance
– strenghten the profile of the EU vis-à-vis its Mediterranean partners along the lines, for instance, of the ‘Mediterranean Partnership Fund’ sponsored by the Italian government
An assumption worth exploring
the 1997 ‘Pilot Project Genoardo’ on the establishment of a Mediterranean Development Bank based on Islamic finance principles
at the end of the XIX century an almost daily eye witness account stretching from 969 – 1250 on trade and finance in the Muslim Mediterranean world is discovered in the Cairo Geniza
Goitein’s Mediterranean Society gives rise to a school
what is a Geniza: it is an unusual repository of discarded writings … reflecting the general conditions prevailing in the Mediterranean region during the Middle Ages
what the Geniza papers are telling us ? They tell us of an incredible success story, of a single multi-ethnical, multi-faith and flexible society that experiences an unprecedented economic development
The Mediterranean Partnership Fund:
an historical perspective
the Fatimid Mediterranean: a cosmopolitan though well rooted society:• common means of payment and a legal tender. The example of the
Sicilian tarì• possibility of buying real estate everywhere• traveling ? A humdrum experience and free movement of people (who
are the foreigners ?)• free movement of books, ideas and intellectuals• high level of interfaith cooperation with no forced integration
how all this was made possible ? Magic ? Not at all: just lack of any state interference: free trade, growing exchanges and free movement: a de facto custom union with free cross-borders investments
and do not be shocked: it was based on IF principles. We see the widespread use of the wakala, the Muslim commenda (mudharaba), the musharaka used across the board by all communities
was Shariah-compliance in business a cause or an effect of prosperousness ?
The Mediterranean Partnership Fund:an historical perspective
The contemporary Mediterranean Sea: an area with several contradictions