Islamic Banking in Europe
The history of Islamic Banking also known as Islamic Finance dates back to the 70s, with the establishment of Dubai Islamic Bank. Since then the Islamic Financial system has prevailed in the Islamic World, and even it has started attracting non-Muslims also. Since Europe comprises of a significant number of Muslim population it was the next stage of Islamic Financial Institutions expansion. This paper will give a detail analysis of the establishment and expansion of Islamic Banking system in the Europe.
Islamic Banking In Europe: The first encounter of the European banks with the Islamic ideology of Finance could be dated back to the early 20th century when some European banks were asked to provide Sharia compliant financial services in Jeddah and Bahrain. In the 70s the Middle East emerged as the center of Islamic Banking with the establishment of the first Islamic Banks in the region like the Dubai Islamic Bank, Kuwait Finance House and Bahrain Islamic Bank. This changed the European bankers’ perception a lot.
The European Banks involved with trade and commerce with these banks started learning about Islamic Finance. (Wilson, 2007) Since there has been a general negative perception of Islam in Europe and even more because of the secular nature of most European countries the Islamic Finance and Banking was viewed more skeptically than enthusiastically in the beginning. Soon the European bankers realized that Islamic Banking is really going to be a lucrative market in the near future with really high prospects of growth.
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United Kingdom was among the first of the European countries to respond to the emerging Islamic Banking market positively. Since the 80s London has established herself as the leading center of Islamic Finance. Various banks in London not only offered Sharia compliant liquidity management services to Islamic banks in Gulf region since the 80s, but also was the first to host retail Islamic bank, the Islamic Bank of Britain, established in 2004. London also took the lead in establishing first Islamic Investment bank in Europe, the European Islamic Investment Bank in 2006.
Moreover many conventional banks also recognized the opportunity of this lucrative and burgeoning business and started providing Islamic Financial services in the local retail market. HSBC and Lloyds TSB are the major players in the market and provide Islamic deposit facilities and housing finance using Sharia compliant structures. Barclays Capital partnered with Dubai Islamic Bank for Sukuk issuances, while Standard Chartered started providing Islamic Finance services in the Gulf region. (Wilson, 2007) Germany is another major player in the Islamic Banking sector.
Since the country hosts significantly larger number of Muslim population as compare to United Kingdom, it felt itself in a dire need to establish this market. The Deutsche was the first to establish capital protected funds in the Gulf region, while German Federal State of Saxony-Anhalt issued sukuk worth €100 million in 2004, which was listed in Luxembourg. (Wilson, 2007) Moreover many insurance companies like Hannover Re Group are offering full Takaful insurance, but these companies are not working inside Germany. (Al Nasser, 2008)
France a country with the largest Muslim population in Europe lags behind other western European countries in this competition. The country has yet to establish a true Islamic Bank for its more than 6 million Muslim population. The French Senate is looking for ways to remove legal hurdles and obstacles for Islamic Finance services, while the French government seemed committed to make Paris the capital of Islamic finance. (Tiberge, 2009) It seems quite probable that by the end of 2009 Islamic banks will set their foothold in Paris and other commercial centers in the country.
Three major Islamic Banks, Qatar Islamic Bank, Kuwait Finance House and Al-Luck Islamic Bank have applied for operating in France. (Lomazzi, 2008) At present there are few Islamic Finance service providers like Algerian Saudi Leasing Holding Company, Socieite General, Capital Guidance and BNP Paribas. (Islamic Financial Institutions, 2009) UBS has played a major role in providing Islamic Banking services among the Swiss banks. Inside Switzerland there are certain organizations that provide Islamic finance services. These include Dar Al Mal Al Islami Trust, Cupola Asset Management, Faisal Finance, and Pictet and Cie.
(Islamic Financial Institutions, 2009) The above-mentioned organizations primarily deals in assets management services. Islamic banking at retail level is yet to be established in Switzerland. The Netherlands is another European country keen to get involved in the Islamic banking sectors. Faisal Finance is currently the primary Islamic Finance services provider in the country. (Islamic Financial Institutions, 2009) Islamic banking is also well established in Luxembourg as there are a number of banks and organizations providing Islamic finance services.
These companies deal in takaful and holding primary, while Faisal Finance is the retail banking services provider. (Islamic Financial Institutions, 2009) Conclusion: The above-mentioned analysis of the establishment and growth of Islamic banking and finance in Europe clearly indicates that Europe is willing to take the advantage of the lucrative market of Islamic banking, but also to facilitate the services to the Muslim population residing in Europe. The recent financial crisis has forced many Europeans to perceive Islamic Banking system as a viable alternative to the conventional banking system.
References: Al Nasser, Lahem. (2008). Germany: Fertile Grounds for Islamic Banking. Asharq Alawsat. Retrieved from the World Wide Web on 20 April, 2009. http://www. aawsat. com/english/news. asp? section=6&id=15131 Islamic Financial Institutions. (2009) Institute of Islamic Banking and Insurance. Retrieved from the World Wide Web on 20 April 2009. http://www. islamic-banking. com/ibanking/ifi_list. php Lomazzi, Marc. (2008). Les banques islamiques arrivent en France. LeParisian. Fr. Retrieved from the World Wide Web on 19 April, 2009.
http://www. leparisien. fr/economie/les-banques-islamiques-arrivent-en-france-27-11-2008-323377. php Tiberge. (2009) Vatican Paper Supports Islamic Finance. France Wants Its Share of Sharia Banking. The Brussels Journal. Retrieved from the World Wide Web on 20 April 2009. http://www. brusselsjournal. com/node/3819 Wilson, Rodney. (2007). Islamic Finance in Europe. European University Institute. Retrieved from the World Wide Web on 19 April, 2009. http://www. eui. eu/RSCAS/WP-Texts/07_02p. pdf
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Islamic Banking in Europe. (2018, May 22). Retrieved from https://phdessay.com/islamic-banking-in-europe/
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