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Islamic Finance in Europe (eBook)

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"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". Reading the title of this report, one can quickly grasp the extent of the economic challenge that Islamic finance represents for the countries of the European Union. What is certainly a pity is that it took a financial crisis for Islamic finance to be propelled to the forefront of the European economic scene when we have had almost over a century of Muslim presence in Europe. It is thus fair to ask the question whether this legal and fiscal adaptation to accommodate Islamic finance is actually made to serve the European population of Muslim faith, who today represent 5% of the population of the European Union and who aspire financial products more in line with their religious beliefs. Demographers even predict that in 2050, 20% of the population of Europe will be Muslim. Is it not Europe's duty to adapt its financial system so that all its citizens can exchange while respecting their values? The reality is different today. Indeed, the economies of the developed countries (including the countries of Europe), especially in the context of the global financial crisis, have more than ever a need for financing if they want to maintain a certain level of growth in their countries, preserve jobs in their businesses and continue to invest in the infrastructure of tomorrow. This is the reason why many world capitals undertook, very early, to adapt their legislation to attract this financial windfall.

In Germany, the United Kingdom and even more so in France, with more than 6 million Muslims, there is a demand for Islamic financial products, both for the financing of private real estate investments and for investments in accordance with the precepts of the Koran. Although a 1999 fatwa of the European Research and Fatwa Council authorises an interest-bearing loan for the purchase of a principal residence in France, many Muslims would prefer to use a means other than conventional credit, even if, by ignorance of the phenomenon, the demand has not yet fully expressed itself. Some go so far as to make a comparison with the consumption of "halal" meat, an embryonic market barely ten years ago, and which, as a result of Muslims' habits, currently accounts for almost 10% of national meat consumption.

On the supply side, some factors are favorable, but others are still holding back its growth. In 2018, Islamic finance was estimated at nearly US $ 2400 million millions in assets and its growth in the next five years was reported to be twice as fast as that of conventional finance. Also, only 50% of the potential market of the Islamic financial industry is currently (2019) exploited (US $ 2400 million millions out of an estimated potential of US $ 4,000 million millions).

"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". Reading the title of this report, one can quickly grasp the extent of the economic challenge that Islamic finance represents for the countries of the European Union. What is certainly a pity is that it took a financial crisis for Islamic finance to be propelled to the forefront of the European economic scene when we have had almost over a century of Muslim presence in Europe. It is thus fair to ask the question whether this legal and fiscal adaptation to accommodate Islamic finance is actually made to serve the European population of Muslim faith, who today represent 5% of the population of the European Union and who aspire financial products more in line with their religious beliefs. Demographers even predict that in 2050, 20% of the population of Europe will be Muslim. Is it not Europe's duty to adapt its financial system so that all its citizens can exchange while respecting their values? The reality is different today. Indeed, the economies of the developed countries (including the countries of Europe), especially in the context of the global financial crisis, have more than ever a need for financing if they want to maintain a certain level of growth in their countries, preserve jobs in their businesses and continue to invest in the infrastructure of tomorrow. This is the reason why many world capitals undertook, very early, to adapt their legislation to attract this financial windfall.

In Germany, the United Kingdom and even more so in France, with more than 6 million Muslims, there is a demand for Islamic financial products, both for the financing of private real estate investments and for investments in accordance with the precepts of the Koran. Although a 1999 fatwa of the European Research and Fatwa Council authorises an interest-bearing loan for the purchase of a principal residence in France, many Muslims would prefer to use a means other than conventional credit, even if, by ignorance of the phenomenon, the demand has not yet fully expressed itself. Some go so far as to make a comparison with the consumption of "halal" meat, an embryonic market barely ten years ago, and which, as a result of Muslims' habits, currently accounts for almost 10% of national meat consumption.

On the supply side, some factors are favorable, but others are still holding back its growth. In 2018, Islamic finance was estimated at nearly US $ 2400 million millions in assets and its growth in the next five years was reported to be twice as fast as that of conventional finance. Also, only 50% of the potential market of the Islamic financial industry is currently (2019) exploited (US $ 2400 million millions out of an estimated potential of US $ 4,000 million millions).


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