Islamic Finance in Europe: A Cross Analysis of 10 European Countries
ISLAMIC FINANCE IN EUROPE – Book Sample
Interconnection Between Society and Islam
Knowledge of the customer base of Islamic finance is different from one European country to another: for instance, France prohibits religious and “ethnical” statistics. We thus need to establish consistently the place of Islam in European countries. This will allow us to assess the perspective of sustainable development of Islamic finance in these countries. It is therefore a question of presenting the sociological and demographic aspects that reflect the perspectives of the development of Islamic finance in each country.
legal Framework of Islamic activity
The practice of Islamic finance is generally limited by legal constraints that arise from the incompatibility between the principles of Islamic finance and certain national legal rules. Thus, in order to accommodate Islamic finance operations, the legal framework may be tuned by the legislator or by the regulatory authorities, if the practitioners themselves did not find appropriate applicable material provisions. Indeed, the freedom to con- tract is sufficient to structure a banking and financial transaction in accordance with the principles of Islamic finance as long as it is not contrary to public order.
These legal arrangements are the center of our inquiry in this axis. To carry it on consistently, we will study legal texts which have undergone modifications to allow exemptions from the common legal framework. Similarly, the analysis of a given national legal framework for certain trans- actions may lead to the formulation of proposals to amend this framework in order to accommodate optimally the particular characteristics of Islamic financial transactions.
current Situation of Islamic Finance
In every chapter, this section puts the current situation of the Islamic financial sector in perspective with the history of Islamic finance for every country considered. This will help to understand the strengths and weak- nesses of an industry in the making by presenting the state of the market. This axis of research differentiates developments affecting each sector of activity such as Islamic banking, Islamic insurance (Takāful), other Islamic financial institutions or the market for the issuance of Islamic financial securities called sukūk.
The study of the academic situation of Islamic finance in each country will allow to know more precisely the ideas that are conveyed about this new industry. Indeed, it will provide sharp criteria for the evaluation of its social and moral anchoring in each country. It will also discuss the special- ized courses in Islamic finance and academic studies.
This book will not be limited to a study of countries belonging to the European Union or the Council of Europe. We decided to review significant countries, from the point of view of either supply or demand. On the demand side, it is easy to figure out that we are interested in countries with a significant Muslim population (e.g. Turkey, One may argue Turkey is only marginally in Europe, but the Turkish financial sector is mostly headquartered in Istanbul, that is, in Europe, … Continue reading Germany, France, Russia, the United Kingdom). On the supply side, some countries have expressed their benevolence to accommodate Islamic financial operations or demonstrated a remarkable expertise in some products: to these categories belong, for instance, the Republic of Ireland and Luxembourg.
However, since the majority of the countries studied are part of the European Union, an introductory chapter will analyze the degree of compliance of the rules governing Islamic finance with European Union legislations. It will then follow various contributions, that is, an article—or two articles depending on the importance of the subject—for each country studied.
Financial Undertakings, Shar¯ica Rules, and the Internal Market Framework: Challenges and Opportunities
Islamic finance refers to the “application of classical ʻIslamic lawʼ in the management of money”1 and covers economic activities performing an intermediary and risk transformation function like conventional finance but operating as interest-free (ribā), real asset-based, and equity-backed businesses, refraining both from taking risks amounting to gambling (maysir) and from exhibiting an excessive degree of uncertainty (gharar). Generally speaking, Islam is considered to be a social system given to humanity by Allah to cover all aspects of human life.2
Accordingly, Islamic finance is based on Divine Law, or Shar¯i ca, as revealed in the Qur’ān and the Sunna. These are, respectively, the Muslim sacred text and the collection of the Prophet Muhammad’s real-life examples. However, Islamic finance is also based upon the interpretation of the sacred texts, or fiqh, according to the premise that “the clarity of the Truth does not mean that it is manifest, and fiqh is the discipline which aims specifically at ʻmaking manifestʼ God’s Will as ʻclearlyʼ revealed in the Qur’ān and exemplified by the Prophet”.3
This chapter takes a normative approach to examining Islamic finance within a non-Islamic setting, namely, the European Union (EU). It is, however, far from being an overview of Islamic financial principles or Shar¯i ca-compliant products and activities, nor is it an in-depth analysis of community-based regulation for banking and financial undertakings.
What it aims to do is to take the community-based framework as a more workable legal setting than national ones, and by analysing how the accommodation process is carried out, this study challenges the mainstream approach that subsumes Islamic financial undertakings within conventional banking and financial regulation as if Islamic financial undertakings were directly com- parable with other socially responsible enterprises or ethical businesses.
The main focus is to argue for the normative autonomy of Islamic finance, that is, of Islamic rules applied to the management of money within the EU legal order, analysing the consequent regulatory challenges and opportunities for the European lawmaker.
The whole analysis is constructed on the premise that the Rome I regulation4 on contractual obligations in civil and commercial transactions is based on connections or conflicts between the laws of different States and may not be applied to Shar¯i ca rules on the management of money because they represent the law of communities rather than of States.
To be precise, the preamble (13) to Rome I establishes that “[t]his Regulation does not preclude parties from incorporating by reference into their contract a non-State body of law or an international convention”. However, scholars have convincingly argued that “incorporation by refer- ence into the contract strongly indicates that such non-state principles only become part of the contract replacing the non-mandatory provisions of the otherwise applicable law, but do not exclusively govern the contract”.5
To read more about the Islamic Finance In Europe book Click the download button below to get it for free
References / Footnotes
|⇧01||One may argue Turkey is only marginally in Europe, but the Turkish financial sector is mostly headquartered in Istanbul, that is, in Europe, geographically, as is the large Muslim community in Russia, which demonstrated a definite interest in Islamic finance since more than a century; cf. Zaripov I. 2013. “ИКЪТИСАД” – ПЕРВЫЙ РОССИЙСКИЙ ЖУРНАЛ ПО ИСЛАМСКОЙ ЭКОНОМИКЕ; Iktisad, the first Russian magazine on Islamic economics, Philology and Culture, 31|