Does Islamic finance have the potential to develop in France?
- Islamic finance in France: a strong, yet untapped, potential
- Key obstacles to the development of Islamic finance in France
- 2011, the year of Islamic finance in France?
Since the opening of the first Islamic bank in Egypt in 1963, Islamic finance has exponentially increased in influence and visibility worldwide. While it remains a small player in the world of finance (0.5%), Islamic finance is becoming increasingly important due to significant increases in oil prices, growing at an average annual rate of 15% to reach $1,300 billion in 2010, according to the IMF. France, which boasts the largest Islamic community in the Western world (estimates range from 3 to 5 million Muslims), surprisingly still lacks an offer of financial products targeted at the Muslim community. Islamic finance in France would have to ensure that the financial products offered at a Sharia-compliant bank would meet the ethical and religious standards of the Muslim community. These principles essentially revolve around the prohibition of 'riba', the interest rate, the prohibition of 'gharar', uncertainty or speculation, and the prohibition of investments in 'haram' industries – i.e. morally reprehensible ones, such as the pork product industry or pornography. Islamic finance also comes with the condition of asset-backed investments and the obligation for the lender to share the profits and the losses of an investment. Despite a thriving market, no real offer of Sharia-compliant products (sukuks, murabaha) currently exist in France.
[...] So far, most of the hindrances to the development of the Islamic finance industry in France have been related to political of psychological barriers. Political barriers are usually the result of French reluctance to seemingly go against “sacro-sainte” secularism. When amendments enabling the issuance of sukuks were to be made to the Civil Code by a law voted on September 17th 2009 (relative to the article 2011 on fiducie), some socialist representatives declared their indignation, claiming that France should not modify its law to accommodate Islamic finance: this would be a threat against the French secular tradition. [...]
[...] Developing Islamic finance would be a way to attract more petroleum dollars and set a foot into a market currently dominated by South-East 1 Islam and International Relations Asia and the Persian Gulf. Thanks to the development of Islamic finance, the Ministry of Economy and Finance plans on attracting billion by 2020. Second, given that Islamic finance is not exclusively targeted at Muslims and that it has many advantages over traditional finance, it could benefit nearly everyone in France. Indeed, the principles on which Islamic finance is founded make it structurally less sensitive to the speculation problem and, thus, inherently less risky. [...]
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