ISLAMIC FINANCE: Bank Dunia & IDB Sepakati Nota Kesepahaman

Bisnis Indonesia

Newswire

Senin, 15 Oktober 2012 | 08:43 WIB

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JAKARTA: Bank Dunia (World Bank/WB) dan Bank Pembangunan Islam (Islamic Development Bank/IDB) menandatangani nota kesepahaman (memorandum of understanding/MoU) dalam menetapkan kerangka untuk kolaborasi dan mendukung pengembangan keuangan syariah (Islamic finance).

Siaran pers Bank Dunia yang diterima di Jakarta, Senin, menyebutkan bahwa kesepakatan yang dibuat WB dan IDB menyetujui landasan dialog internasional tentang keuangan syariah sebagai perangkat potensial untuk pertumbuhan yang inklusif dan berkelanjutan.

Presiden IDB,  Ahmad Mohamed Ali, dan Managing Director WBr Mahmoud Mohieldin, menandatangani MoU di Tokyo, Jepang, pada Minggu (14/10), bertujuan yang sama untuk mendorong, mendukung, dan mempelajari pengembangan keuangan syariah secara global.

MoU itu mengadopsi sejumlah prinsip, seperti saling membagi pengetahuan untuk mengidentifikasi dan menyebarkan praktik yang tepat dalam industri jasa keuangan syariah, serta menyuburkan gagasan yang akan mendorong pengembangan keuangan syariah yang penting untuk pertumbuhan, efisien dan inklusi finansial.

Selain itu, MoU tersebut juga mendorong riset dan mempromosikan kesadaran kerangka manajemen risiko yang sesuai untuk lembaga keuangan syariah pada khususnya dan industri keuangan syariah pada umumnya, serta membangun kapasitas dalam industri jasa keuangan syariah dengan maksud mendukung stabilitas finansial dan mempromosikan peningkatan akses terhadap jasa keuangan syariah di pasar di seluruh dunia.

Mahmoud Mohieldin menekankan pentingnya MoU itu untuk meningkatkan pembangunan kapasitas dan saling membagi pengetahuan antara dua lembaga tersebut.

"MoU yang ditandatangani antara IDB dan WB akan membantu memperdalam pemahaman tentang keuangan syariah, dan membangun kapasitas untuk mengembangkan lembaga dan instrumen untuk mendukung pertumbuhan inklusif yang berkelanjutan, dan membantu masyarakat guna mencapai sasaran pembangunan dengan penekanan pada pengentasan kemiskinan dan pembagian kesejahteraan," katanya.

Presiden IDB, Ahmad Mohamed Ali, mengatakan bahwa penandatanganan MoU itu juga bertujuan membentuk kemitraan strategis antara dua lembaga di area keuangan syariah, termasuk akses yang lebih besar bagi kaum papa, dan kestabilan finansial di dalam negara-negara anggota lembaga tersebut.

"Kami akan melakukannya dengan memperluas basis pengetahuan sebagaimana keahlian untuk mendukung usaha negara-negara anggota dalam rangka membangun lembaga yang resilien dan mengembangkan instrumen untuk mencapai inklusi finansial yang lebih besar dan pembangunan yang berkelanjutan," ujarnya.

Aset keuangan syariah global diperkirakan meningkat secara signifikan selama tiga dekade terakhir, yaitu dari sekitar 5 miliar dolar Amerika Serikat (AS) pada akhir 1980-an menjadi lebih dari 1,2 triliun dolar AS pada 2011.(Antara/Faa)
 

Keuangan Islam

Tantangan Sistem Keuangan Islam *)

Jum'at, 27 April 2012 | 09:55 WIB

TEMPO.CO, Dengan beredarnya berita bahwa pemerintah Inggris akan menjual 82 persen sahamnya dalam Royal Bank of Scotland kepada pemerintah Abu Dhabi, sekali lagi ditunjukkan pengaruh sistem keuangan Islam yang semakin besar di dunia. Pengaruh ini juga merupakan ancaman sistemik terhadap sistem keuangan yang dominan di dunia saat ini.

Dari awal yang merendahkan diri pada 1990-an, sistem keuangan Islam telah berkembang menjadi industri triliunan dolar. Pasar sepakat bahwa sistem keuangan Islam mempunyai masa depan yang cerah, berkat demografi yang menguntungkan dan meningkatnya pendapatan di kalangan masyarakat muslim.

Kendati ada skeptisisme mengenai akomodasi antara sistem keuangan Islam dan sistem keuangan global, semakin banyak bank terkemuka membeli surat utang Islam dan membentuk anak perusahan yang khusus melakukan transaksi menurut sistem keuangan Islam. Undang-undang khusus telah dikeluarkan di pusat-pusat keuangan non-muslim--London, Singapura, dan Hong Kong--untuk melancarkan operasi bank-bank Islam dan lembaga-lembaga keuangan yang terkait dengannya.

Bagaimana kita harus memandang perkembangan ini dari perspektif sistem keuangan Barat dan menurut analisis ekonomi arus utama? Apakah sistem keuangan Islam benar-benar merupakan suatu sistem keuangan alternatif yang bisa diandalkan?

Bahwa pertanyaan semacam itu diajukan sekarang ini mempunyai arti yang penting. Belum begitu lama yang lalu, sistem keuangan Islam diremehkan sebagai sistem keuangan “suku bunga nol” yang bakal berujung pada pengerahan dan penggunaan dana yang tidak memadai dan tidak efisien. Ironisnya, banyak bank arus utama sekarang justru secara rutin menerapkan kebijakan semacam itu ketika memburu quantitative easingyang masif.

Ada dua prinsip sentral dalam sistem keuangan Islam: mengharamkan bunga atas transaksi keuangan, dan menerapkan standar moral yang tinggi yang harus dipatuhi baik oleh kreditor maupun debitor. Menariknya,rationale sistem suku bunga nol ini tercantum dalam Teori Umum John Maynard Keynes: “Ketentuan yang melarang riba merupakan salah satu praktek ekonomi paling tua yang pernah kita catat… Karena itu, di suatu dunia di mana tidak seorang pun dianggap aman, hampir tidak terelakkan bahwa suku bunga, kecuali dikendalikan dengan segala instrumen yang ada dalam masyarakat, bakal meningkat terlalu tinggi sehingga tidak mungkin bakal ada rangsangan yang memadai bagi masyarakat untuk berinvestasi.”

Keynes mengatakan bahwa hanya suku bunga nol atau yang sangat rendah yang bisa menjamin penyediaan lapangan kerja sepenuhnya dan distribusi yang adil. Pernyataan Keynes yang mendukung kebijakan seperti itu tidak berarti ia benar, namun analisisnya patut dianggap sebagai pernyataan yang serius.

Patut diingat bahwa, walaupun bunga diharamkan menurut sistem keuangan Islam, tidak demikian halnya dengan laba. Laba diperoleh dari berbagai pengaturan yang memadukan pendanaan dan kewirausahaan. Esensinya, ia merupakan sistem bagi laba dan bagi risiko berdasarkan sepenuhnya pada equity finance.

Sistem keuangan Islam, karena itu, bertolak belakang dengan sistem yang dominan saat ini yang didasarkan pada utang yang berbunga, di mana risiko secara teoretis dibebankan kepada debitor, tapi dalam prakteknya disosialkan, atau disesuaikan, dengan kepentingan masyarakat di saat krisis. Dalam keadaan serupa, sebagian besar ekonom sepakat bahwadebt finance berujung pada ketidakstabilan yang lebih parah daripadaequity finance.

Dari prinsip utama kedua sistem keuangan Islam ternyata bahwa, jika orang dengan teguh mematuhi persyaratan etikanya, bakal tidak timbul banyak persoalan moral hazard dalam perbankan Islam. Moral hazard ada di semua sistem di mana negara pada akhirnya menyerap risiko yang dibawa warga pribadi.

Tapi, apakah sesuatu sistem itu efisien dalam menghindari moral hazardmerupakan persoalan praktek, bukan teori. Banyak pihak sepakat bahwa, secara historis, moralitas Kristen memainkan peran penting dalam pertumbuhan kapitalisme Barat. Bagaimanapun, kapitalisme sekuler telah mengalami erosi nilai, di mana sektor keuangan telah menempatkan kepentingannya sendiri di atas kepentingan masyarakat. Jika nilai etika dalam sistem keuangan Islam--yang didasarkan pada hukum syariah--bisa selanjutnya mencegah terjadinya moral hazard dan penyalahgunaan tugas oleh lembaga-lembaga keuangan, sistem keuangan Islam terbukti bisa menjadi alternatif yang serius terhadap model derivative finance yang ada saat ini.

Lagi pula prinsip dasar sistem keuangan Islam memaksa kita untuk meninjau kembali basis etika sistem moneter modern, yang telah berkembang menjadi sistem global mata uang cadangan global berdasarkan fiat money. Di masa lalu, emas merupakan jangkar stabilitas moneter dan disiplin keuangan, walaupun emas itu sifatnya deflasioner.

Batu ujian bagi setiap sistem keuangan alternatif akhirnya bergantung pada apakah ia--atau ia bisa--lebih efisien, lebih etis, lebih stabil, dan lebih mampu beradaptasi daripada sistem yang ada sekarang. Untuk sementara ini, belum ada mata uang cadangan dan lender of the last resort Islam. Tapi dunia Islam merupakan pemilik sumber daya alam yang besar yang mendukung kegiatan perdagangan dan keuangannya.

Sementara pengaruh dunia Islam semakin besar, sistem keuangan Islam bakal menjadi pesaing yang tangguh terhadap sistem keuangan yang ada saat ini. Dunia bakal banyak diuntungkan bila kedua sistem keuangan ini dibiarkan bersaing dengan jujur dan konstruktif guna memenuhi kebutuhan masyarakat akan berbagai sistem keuangan.

*) Andrew Sheng dan Ajit Singh *)

Hak cipta: Project Syndicate
*) Andrew Sheng: Penasihat Kepala pada Komisi Regulator Perbankan Cina, Wakil Ketua Hong Kong Monetary Authority; Ajit Singh: guru besar ekonomi pada Cambridge University.

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Islamic banking flourishes in UK

Islamic banking flourishes in UK

by OnIslam & Newspapers
Source: Onislam.net

January 27, 2012

An already flourishing Islamic bank in the the United Kingdom is expanding its branches in the northern city of Yorkshire and other British cities to answer a strong demand for its Shari`ah-compliant services.
“We hope that this will give us a foothold in the Yorkshire region. We have plans to expand throughout the UK in 2012,” Imran Pasha, head of retail department at the Islamic Bank of Britain (IBB), told the Yorkshire Post on Tuesday, January 24.

“We expect a tenfold increase in business in the next three to four years. One of the key aspects of that is the agency model, where we partner with a complementary business and we use that as a springboard to go out into the target market and offer them Shari`ah-compliant products and services.”

The Islamic Bank of Britain, granted a license in August 2004, became the first Islamic bank in Britain and has continued to attract customers for mortgages.
It opened its eighth branch in the country in the office of Reeds Rains Estate agents in Dewsbury, West Yorkshire.

“The fact we’ve chosen Dewsbury to be the first agency shows the importance we attach to the West Yorkshire region,” Pasha said.
“It will allow us to access the target market in the surrounding towns and cities. We are the largest provider of Islamic retail products in the UK.
“We plan to open another five agencies across the UK this year. We will then review the performance, and if there’s demand, and the business case stacks up, we are open to suggestions of opening more outlets in the Yorkshire region,” he added.

Islam forbids Muslims from usury, receiving or paying interest on loans.
Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, trafficking, sexual trading, tobacco, weapons or pork.
Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.
Investors have a right to know how their funds are being used, and the sector is overseen by dedicated supervisory boards as well as the usual national regulatory authorities.

Islamic banking is one of the fastest growing financial sectors in the world.
The Shari`ah-compliant system is now being practiced in 50 countries worldwide, making it one of the fastest growing sectors in the global financial industry.
Currently, there are nearly 300 Islamic banks and financial institutions worldwide whose assets are predicted to grow to $1 trillion by 2013.

Islamic Banking

With London becoming a hub for the Islamic banking, the IBB eyes to take a share of the booming industry.
“We’re hopeful of capturing 30 to 40 per cent of the target market. Over the last seven years, we have grown from zero to 50,000 customers across the UK,” Pasha told the Yorkshire Post.
“This year we’ll be looking at re-launching our commercial property finance proposition, which will be looking at bespoke deals for the target market.”

A deepening debt crisis in the West gave Islamic banking an increasing credibility, becoming a safer and more stable alternative to conventional finance.
“The recent economic crisis has been a boon for us. We have people of different faiths, ringing us up and enquiring about how they can apply for it,” Pasha said.
“It’s about having an alternative to interest-based banking, which is fair and transparent and which also conforms to their ethical beliefs.”

The bank intends to educate its customers of all beliefs about the benefits of Islamic finance
“There’s a large group (of customers) who want to see people face to face. Traditional banks and traditional building societies have lost sight of that. We want to be a community bank,” said Simon Walker, the head of home purchase plan sales at the IBB.
“It’s about reaching out to the community through different distribution channels. One of the key pillars of our growth over the next four or five years is commercial property finance.

“The Muslim community in the UK is 2.5m people. That’s growing at a fairly rapid rate. We want to be a one-stop shop for a range of products,” Walker added.
Sohaib Bin Hamid, the bank’s Dewsbury-based business development manager, agrees.

“We have a lot of non-Muslim clients, purely because of the way that we bank. We have no toxic liabilities,” Hamid said.
“A lot of the banks are cutting thousands of jobs – we are recruiting people. We’ve seen a big downturn and we need to contribute to getting the economy back where it belongs.”

Related Stories:

1. How the rise of Islamic banking is changing Turkey
2. HSBC eyes Islamic Banking services for Australia
3. Western debt crisis spurs Islamic Finance growth

Germany /Islam-Finance: Deutsche Bank awarded for its Islamic Finance business

By IINA– January 24, 2012

Posted in: News

BERLIN, 1 Rabi 1/24 Jan (IINA)- Deutsche Bank has won Islamic Finance news “Best Islamic Trustee/Custodian 2011” Award. In addition, Deutsche Bank received the awards for “Project Finance Deal of the Year 2011″ and “Saudi Arabia Deal of the Year 2011″ recognizing Deutsche Securities Saudi Arabia’s successful execution of Saudi Aramco Total Refining and Petrochemical Company (SATORP) Sukuk Certificates.

The awarded SATORP Sukuk was the first public project Sukuk in the Kingdom of Saudi Arabia and in the region with an innovative Sharia structure of a combination of Istisna and Ijara with Musharaka contractual overlay interposed between the two.

“We are honored to have received these awards from Islamic Finance news, as this reaffirms our dedication and focus to servicing the needs of the growing Islamic Finance market. Our expansion in Asia and MENA has fuelled impressive growth in Sukuk transactions and through our trust and custody businesses we are committed to delivering world-class solutions to our clients”, said F. Jim Della Sala, Managing Director and Global Head of Trust and Agency Services Deutsche Bank.

This is the second consecutive year that Islamic Finance news has recognized Deutsche Bank’s excellence in providing Islamic Trustee and Custody Services in their annual Global Banking Awards.

“We are very pleased to receive these awards which underline our strong commitment to Islamic Finance. The awards demonstrate our ability to adapt all types of investment products and strategies to the Sharia compliant world. The Deal of the Year Award reflects Deutsche Securities’ dedication to the Kingdom of Saudi Arabia along with its capabilities to structure complex Islamic Finance transactions”, said Ashok Aram, CEO Deutsche Bank MENA.

Deutsche Bank is a leading global investment bank with a substantial private clients franchise. Its businesses are mutually reinforcing. A leader in Germany and Europe, the bank is continuously growing in North America, Asia and key emerging markets. With more than 100,000 employees in 73 countries, Deutsche Bank offers unparalleled financial services throughout the world. The bank competes to be the leading global provider of financial solutions, creating lasting value for its clients, shareholders, people and the communities in which it operates.

AH/IINA

Sharia banking records show impressive growth in Indonesia

Sharia banking records show impressive growth in Indonesia

The Jakarta Post, Jakarta | Sat, 05/01/2010 12:12 PM

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Islamic banking has recorded impressive growth in Indonesia since it was introduced 17 years ago and Bank Indonesia has set a goal to make the country an Islamic financial hub in Asia, even in the world.

Central bank data reveal that assets of the Indonesian sharia banking industry has risen more than 35 times from Rp 1.79 trillion in 2000 to Rp 66.089 trillion at the end of 2009, with an impressive average growth of 53.32 percent per year over the past eight years.

In the period of 2008-2009, the industry's assets grew by an average 33.4 percent per year, well above the growth recorded by the sharia banking industry of the Southeast Asian region in the same period, which stood at 15 to 20 percent per year.

Bank Indonesia is optimistic that the industry will grow more impressively in the future as a result of the enactment of Law No. 21/2008 on sharia banking, which regulates all matters related to sharia banking. This has been indicated by, among other things, the fact that financing provisions by Islamic banks grew by an average of 22.8 percent per year and fund collection from the public by 37.7 percent per year in 2008-2009.

Meanwhile, financing to deposit ratio (FDR) of the industry reached 90 percent over the past five years - an indication that Islamic banks have been actively supporting the growth of the real sector, the bank said.

The sharia banking network has also been widely expanded throughout the country. As of December 2009, the network included 1,140 offices and 1,805 sharia services in 32 provinces. The sharia service is also supported by a network of 6,000 Joint ATMs and 7,000 BCA ATMs. The sharia banks have also utilized mobile banking technologies, allowing customers to do transactions via mobile text, phone or the internet. This is part of their efforts to provide services that fit the modern and mobile lifestyle of their customers.

The industry has recorded a relatively high growth of profitability with return on equity (ROE) reaching 25.22 percent a year in the period of 2008-2009.

"All of the above descriptions indicate that sharia banking in Indonesia is a financial industry based on the real sector and is a promising business sector for investors, entrepreneurs and the public," the bank said.

The bank added that the development of the Islamic banking system in the framework of a dual-banking system within the Indonesian Banking Architecture presents a more complete banking service to Indonesian people. Together, the Islamic banking system and conventional banking system can synergically support a greater mobilization of public funds to increase financing capability to boost the country's economic development.

"With the human resources and the natural resources potential that we have, Indonesia has an opportunity to become the platform of an Islamic financial center or Islamic financial hub in Asia, even in the world.

"The realization of Indonesia as the world center of the Islamic economy is expected to open wider opportunities for financing sources from the international Islamic financial markets to make investments in many potential sectors in Indonesia.

"To materialize this vision, the President of the Republic of Indonesia has put Islamic banking and financial development on the national agenda," the bank added.

Citing the positive characteristics of Islamic banking, Bank Indonesia said Islamic banking put emphasis on fair transactions, ethical investments, togetherness and brotherhood in production and avoidance of speculative activities. All these benefits are "available not only to Muslims but to all Indonesian people without exception."

Islam in Europe

Profits in the Name of Allah 

Sharia Banking Comes to Germany

By Christoph Pauly

Germany's Muslims are finally getting a bank offering financial products that comply with Sharia law. It is a market worth billions, and one that many major banks around the world have long discovered.

There are four million Muslims living in Germany. They eat, drink and pray in accordance with the precepts of the Prophet Muhammad. But when it comes to monetary transactions, the principles of the Koran have played hardly any role in Germany. That is about to change.

Early next year, the first Islamic bank in Germany to offer products that are in compliance with Sharia law will open its doors. The bank, Kuveyt Türk Beteiligungsbank, will open a branch in the downtown area of Mannheim, a city in western Germany, and branches in other cities are also planned.

The regulators with Germany's Federal Financial Services Authority, known as BaFin, recently issued a limited license to the subsidiary of a Turkish-Kuwaiti bank. It is only permitted to collect funds that are transferred to accounts in Turkey that conform to Islamic rules.

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Photo Gallery: A Sharia Banking Market Worth Billions

In other countries, the banking industry initially catered to Muslims on an equally small scale. But less than 10 years after first entering the market, all major banks in Great Britain now have Islamic divisions, and there are also five Islamic banks in the country.

The Prophet Muhammad's Prohibition of Interest

Worldwide, assets worth well over $700 billion (€470 billion) are now being managed in accordance with Islamic principles. In Germany, on the other hand, virtually no banks have so far even addressed this market.

The underlying concept of the Islamic banking business is the Prophet Muhammad's prohibition of interest. Like Jesus in the New Testament, Muhammad took action against the usurers of his time, who exploited their contemporaries by charging them exorbitant interest, sometimes well over 100 percent. Muhammad summarily prohibited charging interest unless something was provided in return. Since the 1970s, Islamic banks have sought to satisfy this requirement by offering their customers financial services on the basis of interest-free transactions.

Instead of interest, customers are promised a share in the profits of the bank. However, commercial activities can also be financed in which the Islamic saver collects a surcharge at a level similar to conventional interest.

Instead of taking out a loan to build a new factory, for example, a company would offer its investors a share of its profits. The important aspect of all of these transactions conducted in the name of Allah is that they are in fact based on a real exchange of goods or services. "The connection to reality must be clear," says Michael Saleh Gassner, a financial expert with the Central Council of Muslims in Germany.

Since the financial crisis, the principles of Islamic investors have also attracted the interest of conservative Christian investors. After all, the underlying concept seems so pleasantly removed from the speculative greed of Western financial executives.

Besides, the stock indexes that contain companies selected according to Islamic principles have sometimes outperformed comparable indexes without the religious association. Sharia-compliant banking transactions are "in a position to assume a global leadership role," says Susilo Bambang Yudhoyono, president of the world's most populous Islamic country, Indonesia.

No Investment in Gambling or Sex Trade

Investments that comply with the Koran still represent only 1 percent of the total market, but the market is growing is by 15 to 20 percent a year. Customers from the oil-rich Persian Gulf region, in particular, insist that their capital must be invested in accordance with religious criteria.

In addition to the prohibition of interest, it is also important to ensure that funds are not invested in gambling or the sex trade. Companies that are heavily in debt are excluded, because the large amount of interest they pay is seen as the work of the devil.

The Munich-based insurance giant Allianz and Deutsche Bank have set up funds and certificates to satisfy Sharia-based criteria, but these products are only actively marketed in Islamic countries. "It is a business requirement in the Gulf region to offer products that conform to Sharia," says Hussein Hassan of Deutsche Bank in Dubai. The bank's Gulf region division is already responsible for 20 to 25 percent of profits.

There is no absolute certainty over which transactions conform to the principles of the Koran. Banks address the problem by appointing well-known Islamic scholars to so-called Sharia supervisory boards, which examine all bank products. In the Gulf region, there are about 10 religious scholars who provide consulting to almost every major Western bank and now have their own large staffs.

This leads to the creation of quasi-religious rating agencies, whose pronouncements have many a London investment banker shaking in his boots. Because different religious leaders interpret the Koran in every country, Deutsche Bank has appointed different Sharia supervisory boards for its businesses in Malaysia, Saudi Arabia and the Gulf region.

Markets Paralyzed by a Fatwa

It is clear that clerics can paralyze entire markets with a fatwa, as Muhammad Taqi Usmani demonstrated in 2007. The renowned religious scholar from Pakistan decided that most modern versions of Islamic bonds, known as Sukuks, were not in compliance with Sharia. He imposed a ban, which affected a booming market in which governments, real estate developers and companies raised about $50 billion in capital in 2007 alone.

The business collapsed. The Dubai-based real estate developer Nakheel is currently fighting to survive. The company had borrowed $3.5 billion to build dozens of artificial islands off the Dubai coast for tenants like football star David Beckham. In December, it will become clear whether the largest Sukuk ever issued can be disbursed. Muslims worldwide hope that Dubai will intervene on behalf of the borrower.

This investment sector is at least showing initial signs of recovery. Deutsche Bank introduced two Sukuks, for the Kingdom of Bahrain and for the Islamic Development Bank, into the market this year. Within a few years, the German bank has become one of the major players in the Islamic banking business. Its investment bankers are considered to be particularly creative when it comes to complying with the interest prohibition, while nevertheless offering investors the greatest possible security.

"The products the investment bankers dream up are sometimes bizarre," says Volker Nienhaus, the president of the University of Marburg in western Germany, who has been studying the Islamic banking industry for 30 years. The circumvention of interest stimulates the fantasy of financial engineers, says Nienhaus. For example, an important part of the platinum trade on London's derivatives exchange is indirectly attributable to Sharia. Because platinum, unlike gold and silver, was not a means of payment in Muhammad's day, the precious metal is now used as collateral for short-term financial transactions.

With some creative finesse, a surprising number of Western financial products can be executed in accordance with Islamic law. "The key Sharia products could be offered in Germany," says Robert Elsen, an advisor in BaFin's international division. According to Elsen, there are "no insurmountable obstacles."

Inspired by the British Model

The German financial regulators plan to host a major international conference next week in Frankfurt am Main to address the issue in Germany. If only to attract more business to German markets, BaFin, inspired by the success of the British model, is now eager to approve more financial institutions that offer Islamic products.

Although the Islamic banks were originally established for wealthy Arabs from the Gulf region, British Muslims are now among their most devoted customers. There is also political support for the development of Islamic financial centers in Paris, Zurich and Geneva.

So far the boom has bypassed Germany, despite the results of new studies showing that no other country in Western Europe has such a large Muslim population. The official explanation is that the Turks living in Germany are not particularly interested. But German financial professionals also fear that they could lose more of their existing customers by introducing Sharia-compliant products than gain new customers.

That argument, says Zaid el-Mogadeddi of the Frankfurt-based Institute for Islamic Banking, is pretty arrogant. He cites surveys that conclude that 75 percent of all Muslims in Germany would like to avail of Islamic financial products. According to Mogadeddi, between 1995 and 2002 Turks lost many billions of euros with "Islamic" shares in companies that had been floated by swindlers, and they now have a strong interest in products from established banks.

Islam-compliant real estate financing arrangements are considered particularly promising. In these situations, banks and customers purchase real estate together, with the customer contributing a share corresponding to his equity. The bank pays rent for the rest, gradually acquiring the remaining shares. As a result, no interest accrues, but the property acquisition tax is charged twice.

Sharing the Risk

The same problem used to exist in the UK. Then Prime Minister Gordon Brown, who was finance minister at the time, insightfully abolished the double tax burden. The Central Council for Muslims is now calling for similar measures to be taken in Germany.

A second stumbling block can also be removed with a bit of good will. Under Sharia law, Muslims who deposit money with a bank must also participate in the bank's risk. But what happens to the deposit insurance, which is set by the government? It comes into effect when a bank becomes insolvent. In fact, consumer advocates across the board have welcomed a recent increase in the deposit insurance limit to €50,000.

In Great Britain, a Muslim customer can expressly waive the insurance of his deposits in an individual agreement. The fact that the British government, in the course of the financial crisis, has nationalized entire banks is probably something like an Act of God under Islamic law. At any rate, there are no signs so far that a significant number of Sharia supporters have legally challenged the government's bailout of their bank.

Translated from the German, Der Spiegel by Christopher Sultan