Abstract
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.
Extract
[...] Does Islamic finance have the potential to develop in France? Islamic finance has a vigorous and yet untapped potential of implementation in France However, strong obstacles –mainly political and psychological – may prevent its development (II). Assuming that France is able to overcome some of these obstacles, the country should see the limited development of some Sharia-compliant products in 2011 (III). I. Islamic finance in France: a strong, yet untapped, potential France has the ability to turn into a popular location for Islamic finance and could benefit from it. [...]
[...] Most importantly, on August 24th 2010, four fiscal reforms tackling the listing of Sukuks in France, the fiducie as well as the tax treatment 2 Jean-‐Marie Wecker Islam and International Relations Jean-‐Pierre Filiu of Islamic financial transactions were passed, enabling the development of Islamic finance operations in a safe and legal environment in France. Thanks to these legal changes, despite the need for some more legal adjustment, banks in France can now foster the development of Islamic finance. Meeting the existing demand for Islamic finance in France could theoretically be highly beneficial to the French economy. Some legal adjustments have been made to accommodate the creation of these products. However, strong symbolic and political hindrances persist, slowing down the development of Islamic finance in France. [...]
[...] While the desire to develop Islamic finance in France could be interpreted as a tolerance signal sent by France to the Muslims, it may also be believed that the driver of this implementation is purely financial, as showed by the emphasis on the development of financial products rather than retail banking. Additionally, the fierce competition with London will make it really hard for Paris to emerge as a major Islamic finance spot. Hence the impact of the introduction of Islamic finance on the Muslims in France may well be limited. [...]
[...] A senate report, dated June 22nd 2007, included no less than 5 references to the pressing need to bolster Islamic finance in France and many politicians have since become convinced that Islamic finance might be beneficial to France. Furthermore, with the help of the Sharia Board and various lawyers and bankers, think tanks such as Paris Europlace have been working on ideas to eliminate potential barriers to the development of Islamic finance. Indeed, previously, complex legal frictions had hampered the development of Shariacompliant products. For example, the double stamp duty would have led to a double taxation of Islamic operations such as murabaha. Additionally, taxing the yields from sukuks would also clash with the prohibition of riba. [...]
[...] Islam and International Relations Does Islamic finance have the potential to develop 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 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. [...]
