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The World’s Leading Islamic Finance News Provider
December 2016 23
Shakeel Adli is a partner and the head of
Islamic ﬁnance at international law ﬁrm
CMS. He can be contacted at shakeel.
firstname.lastname@example.org. Paula Wilson is
an associate in the same law ﬁrm and assisted in the drafting of
this report. She can be contacted at paula.wilson@cms-cmck.
Review of 2016
There have been a number of significant developments in Europe
in 2016 that are likely to impact 2017 and beyond. In April, the
Islamic Fintech Alliance was launched by eight founding members
of crowdfunding platforms with the aim of facilitating the adoption of
fintech among Muslims across Europe.
In the UK, the decision to leave the EU has caused the value of
the pound to steadily fall. This has been good news for investors,
including Islamic investors such as Rasmala which acquired Abbvie
House, a 55,958 square feet grade A office building located in
Vanwall Business Park, Berkshire, for GBP24.5 million (US$30.49
Meanwhile, Germany’s sovereign Sukuk issuance of US$1 billion
is expected by the end of 2016 (although this had not yet been
completed at the time of writing). German real estate also remains
an attractive proposition for Shariah compliant investors with Natixis
Pfandbriefbank having provided a five-year GBP90 million (US$112
million) Shariah compliant facility in May 2016 to a London-based
investment company, the proceeds of which were used to part-fund
the acquisition of an office building in Frankfurt.
In France, which has Western Europe’s largest Muslim population,
while the penetration of Islamic finance has not been as great as
in, for example, the UK, 2016 has seen some notable growth and
innovation, demonstrated most recently by SAAFI, an insurance
and Islamic finance specialist, which launched its iFIS Islamic Gold
Dinar Savings Plan for the French market. Major French financial
institutions such as BNP Paribas, Societe Generale, Calyon and
Crédit Agricole also all continue to remain active in the international
Islamic finance market. In Central and Eastern Europe, the picture is
less rosy and there has been very limited activity.
Preview of 2017
Looking ahead to 2017, the impact of the aforementioned
developments and the new Shariah compliant products that will
institutions will launch pension schemes in the UK or elsewhere (as
Al Rayan in the UK has done) or crowdfunding platforms will begin
offering Shariah compliant products throughout Europe.
In terms of regulation, the Islamic Finance Council UK and the
International Shari’ah Research Academy for Islamic Finance are
urging governments and Shariah compliant financial institutions in
Europe and beyond to implement a mandatory independent audit of
Shariah compliance in Islamic finance. It is hoped that this will lead
to a greater degree of accountability.
It will be interesting to see how this, as well as the regulation of
Shariah compliant financial institutions, develops over the next year
In the UK, the government intends to invoke Article 50 of the Treaty
on European Union by March 2017, although this timing may be
delayed following the High Court ruling that parliament must give
approval before Article 50 is triggered. It remains to be seen,
perhaps as early as March 2019, what impact Brexit, and the run-up
to Brexit, will have on the UK’s dominant position on Islamic finance,
although commentators have pointed out that challengers such as
Luxembourg have a long way to go if they are to compete with the
UK’s hold on the market.
In Germany, KT Bank (which became the country’s first Islamic bank
when it launched in 2015) expects its customer base to include
around 20,000 business and private customers by 2017. Three more
Islamic banks may be joining KT Bank in Germany soon, as the
Central Bank of Iran announced earlier this year that Parsian Bank,
Sina Bank and Middle East Bank plan to open branches in Munich.
In addition, the world’s largest Islamic financial market, the Iranian
Securities and Exchange Organization, and the German financial
regulator, BaFin, have agreed to jointly develop areas that benefit
their respective capital markets. The collaboration may lead to
exciting Shariah compliant cross-border opportunities.
In France, Paris in particular remains a very attractive market for
Shariah compliant real estate investment and the expectation is that
the growth that France has seen in recent times will continue into
Islamic finance in Central and Eastern Europe could also come to
the fore in 2017. However, this will depend on the extent to which
the governments in this region encourage the take-up of Shariah
compliant structures and products, be it through tax, regulatory or
2017 should be an exciting year for Islamic finance in Europe, as the
impact of constitutional developments such as Brexit, technological
developments such as fintech and regulatory developments such as
the call for an external audit of Shariah compliance becomes more
and more apparent.
Will challengers come to the fore in 2017?
By the start of 2016, the global Islamic financial services industry had,
according to the IFSB, exceeded an overall total value of US$1.88 trillion. In
Europe, Islamic finance continues to grow, particularly in Western Europe
where real estate remains highly attractive for investors. According to
is now carried out on a Shariah compliant basis. SHAKEEL ADLI and PAULA
WILSON delve further.