Germany urges more Islamic finance integration globally

ANKARA: Islamic finance is increasingly important in the global economy and needs to be better integrated into the international financial system, German Finance Minister Wolfgang Schaeuble told a meeting of the Group of 20 leading economies.

“We all have a better understanding of the risks and role of Islamic finance now,” Schaeuble, reporting on the G20’s Investment and Infrastructure Working Group, told G-20 finance ministers and central bankers gathered in Ankara.

The World Bank, Islamic Development Bank and countries including Saudi Arabia and South Africa had shared their practical experiences with asset-backed financing and Islamic finance in particular over the past year, he said.

“Islamic finance is growing in importance for the global economy. It is therefore important that international financial institutions consider questions related to integrating Islamic finance into global finance,” Schaeuble said, according to a text of his speech obtained from the German delegation.

Islamic finance holds systemic importance in countries such as Kuwait and Qatar, and has made wider gains buoyed by support from governments such as Pakistan and Turkey.

The asset-backed nature of Islamic finance should in theory make it ideal to build highway networks, ports and other big projects. 

An estimated $800 billion worth of infrastructure financing will be needed each year in Asia alone over the next decade, according to the Asian Development Bank.

(Arab News / 07 September 2015)

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Germany's first interest-free Islamic bank opens in Frankfurt

Germany has opened its first Islamic bank representing a full range of banking services in accordance with the laws of Sharia. The Frankfurt-based bank, called KT Bank AG, is owned by Kuveyt Turk, the largest Islamic banking institution in Turkey.

KT Bank has also opened its affiliates in Mannheim and Berlin and plans to reach Cologne, Hamburg and Munich in the near future.

The Sharia law Islamic banks prohibit bank from charging interest on loans, as well as to take part in investments, especially those considered haram, like gambling, weapons, prostitution and alcohol.

Thus, Islamic banks do not provide customers with a mortgage; instead they buy a house and resell it at a higher price that already includes interest. Given the fact that the bank pays the tax twice – with the purchase and sale of the house – deals become much more expensive compared to those from conventional banks.

Among 4.5 million Muslims residing in Germany, 21 percent are ready to use the services of an Islamic bank, said the head of Kuveyt Turk Bank Kemal Ozan referring to a poll carried out by his company. However, Kuveyt Turk noted that it focuses not only on the Muslims living in Germany, but expects to approach the entire German market.

In 2010, Kuveyt Turk opened a small office in Mannheim, Baden-Wuerttemberg. In 2012 it appealed to the German authorities for a full banking license.

Istanbul-based Kuveyt Turk is one of the largest banks in Turkey and is part of Kuwait Finance House, which is mostly owned by Kuwaiti investors.

Islamic banks have already proved quite successful in the markets of England and France. UK housesfive Islamic banks and the Islamic Bank of Britain reported a 55 percent increase in deposits of non-Muslims over 2014. The bank associates these figures with the Barclays’ rate rigging scandal.

The UK has also become the first non-Muslim country to issue sukuk – an Islamic bond equivalent similar to a participation certificate. This type of bond is also utilized in Hong Kong, Luxembourg and South Africa.

(RT / 01 July 2015)

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First Islamic bank in Germany to open in July

Germany is to get its first fully operational Islamic bank on July 1. Opened by the Turkish finance group Kuveyt Turk it will provide Sharia compliant banking services.

“This new achievement will open vast areas of business and investment in Europe’s largest economies, as this is the first bank to obtain a full function license to take deposits and offer credit finance facilities in Germany as per Islamic rules and regulations,” Kuwait Finance House said in a statement on Thursday.

The wholly-owned subsidiary of the Turkish lender will be called KT Bank AG with its headquarters based in Frankfurt and branches in Cologne and Berlin. It will serve Germany’s 4 million Muslims but also plans to expand its services throughout Europe.

"Our market research has shown, that 21 percent of Muslims in this country would see an Islamic bank as their natural household bank," Kuveyt Turk’s managing director Kemal Ozan was cited as saying by Deutsche Welle.

The bank will operate under the principles of Islamic Sharia law, under which it can’t participate in speculative ventures or investments, can’t charge interest on loans, based on the Islamic teaching that a Muslim may not benefit from lending money or receiving money from someone else. Islamic banks, however, may still purchase assets and resell them for a profit. Sharia law also forbids investment in industries like gambling, alcohol or pornography. Islamic banks tend to stay away from companies with debts amounting to more than 30 percent of their value.

Islamic banking is growing faster in Britain and France than in many Islamic countries in the Middle East and Asia. Britain remains Europe's main Islamic finance hub with its five Islamic banks. Luxembourg is also planning to launch an Islamic lender of its own. The Islamic Bank of Britain reported a 55 percent rise in applications for its savings accounts by non-Muslims in 2014 after the Barclays rate-fixing scandal.

Britain became the first non-Muslim country to begin trading in sukuks that are the Islamic equivalent of bonds. Hong Kong, Luxembourg and South Africa have also issued sukuks.

In 2010 Kuveyt Turk, the largest Islamic bank in Turkey, which is 62 percent owned by Kuwait Finance House, set up a branch in the southwestern German city Mannheim, but was not fully operational. In 2012 it applied for a full banking license, and plans invest $48.7 million in the planned German unit.

(RT / 24 April 2015)

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First Islamic Bank to Open in Germany

According to the Handelsblatt newspaper, German regulator Bafin, is to grant a full banking license to the Turkish bank, Kuveyt Turk Bank AG. The first branch of the bank is expected to be up and running in June, with branches planned for Frankfurt, Cologne and Berlin. The bank also plans to expand its services throughout Europe, according to a statement, released yesterday.

The bank’s guidelines will conform with sharia law. This means that it will not involve itself in speculative ventures or investments, and it cannot charge interest on loans, based on the Islamic teaching that a Muslim may not benefit from lending money or receiving money from someone else. Islamic banks may still purchase assets and resell them for a profit, however.

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Islamic banks do not put any money into companies that produce alcohol or deal with pornography, gambling or pork and they also tend to stay away from companies with debts amounting to more than 30% of their own value.

According to Kemal Ozan, the managing director of Kuveyt Turk, the banks hopes to be popular with Germany’s four million Muslims - the largestMuslim community in Europe.

"Our market research has shown, that 21% of Muslims in this country would see an Islamic bank as their natural household bank," Ozan said.

Britain remains Europe's main Islamic finance hub, with five fully-fledged Islamic banks, and 20 banks that offers Islamic banking services.

The demand for Islamic banking is now increasing across the rest of Europe, due to the growing Muslim population on the continent. According to the U.S.-based Gatestone Institute, Islamic banking is growing faster in Britain, France and Germany than in many Islamic countries in the Middle East and Asia.

The sector is growing too among non-Muslims. The Islamic Bank of Britain reported a 55% increase in applications for its savings accounts by non-Muslims last year after the Barclays rate-fixing scandal.

Tim Sinclair, senior head of marketing and retail sales at Al Rayan bank, formerly the Islamic bank of Britain, says that over the last two years 83% of customers making fixed-term deposits were non-Muslims. Sinclair believes this is due to the ethical attraction of the bank. “We’re relatively small, and we  tick the ethical box,” he says. “Being Sharia compliant means we’re not investing in bad things, and we’re transparent.”

The number of asylum seekers arriving in Germany, many from the Middle East, jumped to around 200,000 last year - four times as many as in 2012. Last week, German government statistics revealed that the proportion of the population without German citizenship is approaching 8.2 million - nearly 10% of the overall population. The number of foreign nationals living in Germany rose by more than half a million in 2014, the most in a single year since 1991 and 1992.

(News Week / 23 March 2015)

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Islamic Banking Knocks Germany’s Doors

CAIRO – Turkey's Kuveyt Turk investment fund plans to open the first Islamic bank in Germany in October, amid hopes of overcoming the bad effects of the ongoing euro crisis and get a share of the successful Islamic banking pie.

"The idea of an Islamic bank is that it adheres to Islamic investment guidelines and principles," Zaid el-Mogaddedi, founder and director of the Institute for Islamic Banking and Finance (IFIBAF) in Frankfurt, told Deutsche Welle on Saturday, September 1.

Istanbul-based financial institute Kuveyt Turk would open the first Islamic bank of its kind in Germany next October.

Germany Tastes Islamic Finance

The bank was introduced as many Europeans hope to sign on to a banking institute that offers only transactions backed by tangible assets rather than highly speculative financial management which caused the ongoing euro crisis.

"You have to see that it in the Islamic financial system are also mechanisms that mimic the interest rate effect - though it is not the same," said Martin Schulte, an Islamic banking expert at the Association of Foreign Banks in Germany.

"Money is fruitless, that is to say that simply transferring money does not create economic value," he said.

"It is a medium of exchange, which itself has no economic power."

Conventional banking, however, is partly based on the concept that lending money is a service in itself that is worthy of compensation.

"But in the Islamic understanding it is possible to develop products that are economically useful and complement the conventional banking business from a macro perspective very well."

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, 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.

Failing?

Introduced years ago in different European countries, experts hope German new Islamic funds to be more successful than that of UK and France.

"The decisive point will be whether the Islamic banks offer an attractive product portfolio and good services," El-Mogaddedi from the Institute for Islamic Banking and Finance, said.

Also “whether the communication is clear enough to bring Muslims and non-Muslims to the bank as an attractive alternative,” he added.

A study published in 2012 by the Stresemann Institute found that "Islamic finance" had failed in European countries because Muslim customers had lower income levels and thus little investment potential.

But El-Mogaddedi said the failure of Islamic financial products in Europe came down to bad marketing.

Staying reluctant for years to taste the booming industry, an Islam-conform investment fund was established in Germany in May 2012 by the Malaysian asset manager CIMB Principal.

The fund was approved by the German Financial Supervisory Authority (BaFin).

Germany has between 3.8 and 4.3 million Muslims, making up some 5 percent of the total 82 million population, according to government-commissioned studies.

The new Islamic finance targets Germany’s roughly 4 million Muslim residents, along non-Muslims.

Islamic banking is one of the fastest growing financial sectors in the world.

Islamic financial products got their first major boost after the 9/11 attacks on the United States.

Many Arabs withdrew their money from the US at the time, and some of those funds, according to Abdullah, ended up in Malaysia and the Gulf states.

A second boost came during the international financial crisis, when Islamic financial products actually showed profits.

The Dow Jones Islamic Market Titans Index, which tracks the 100 biggest Islam-compliant businesses in Europe, the US and Asia, has nearly doubled over the last five years.

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 amounting to $1.6 trillion (1.2 trillion euros).

(On Islam / 01 Sept 2012)

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Malaysians to bring Islamic banking to Germany

Islamic investing represents a 1.2 trillion euro market. Now one Malaysian firm wants to bring the trend to Germany. Others have tried and failed before, so it could be a struggle.

Confident and professional, the female chief executive of Malaysia-based CIMB-Principal recently gave a press conference in Frankfurt about the only registered Islamic investment fund in Germany.

Noripah Kamso said, "I want to share the new i-word with you. It doesn't stand for iPad, iPhone or inflation–but for Islamic banking."

The firm's goal is to win over Germany's roughly 4 million Muslim residents, along non-Muslims, to the bank's strategy of investing in accordance with the Koran.

The Muslim market

Islamic investment firms have been around since the 1970s. They prohibit interest, speculation and betting. They also do not put any money into companies that make alcohol or deal with pornography, gambling or pork. Islamic investment firms also keep away from companies with debts amounting to more than 30 percent of their own value.

In spite of these restrictions, customers of Islamic financial products can make money through a number of tricks. For instance, such customers earn no interest, strictly speaking, on their bank accounts. Yet it is a common practice for banks to contribute a sum to such customers' accounts every year in place of the interest.

An association of banks based in Muslim countries assesses whether or not firms conform to the Koran. According to CIMB-Principal, Germany has 27 publicly traded companies, including chemical giant BASF, that qualify.

The Islamic finance industry value is estimated at about 1.2 trillion euros (about $1.6 trillion), with yearly growth of more than 15 percent. Malaysia and countries in the Persian Gulf are the main nations to bind their firms to Islamic rules.

Even though Islamic banking accounts for just one percent of the global financial industry, there has been an increasing demand for alternative investments since the onset of the financial crisis. That's according to Daud Abdullah, president of the Global University of Islamic Finance in Malaysia's capital Kuala Lumpur.

"If people invested more in Islamic finance, the world would not have such problems," he said. "Then we wouldn't have highly speculative instruments that provide no economic benefit, but get countries deep into debt."

Branching out

Islamic financial products got their first major boost after the terrorist attacks of September 11, 2001. Many Arabs withdrew their money from the US at the time, and Abdullah says some of those funds ended up in Malaysia and the Gulf states.

A second boost came during the international financial crisis, when Islamic financial products actually showed profits. The Dow Jones Islamic Market Titans Index, which tracks the 100 biggest Islam-compliant businesses in Europe, the US and Asia, has nearly doubled over the last five years.

That is why a growing number of non-Muslims are also showing interest, said Abdullah, a scientist and Muslim convert.

"Islamic finance is for everyone," he added. "If you look at [Islamic finance] globally, 60 percent of investors are not Muslims."

If you build it, they will come?

In CIMB-Principal's first phase, the firm wants to arouse interest in Germany's Muslim population. According to studies by the firm, 23 percent of German Muslims want to put their money in Islamic investments.

"Most Muslims in Germany are from the second or third generation," Kamso said. "Many of them have good jobs."

CIMB-Principal's second phase is to target non-Muslim investors. But the prospects are not especially promising. Unlike in the UK, where many firms similar to CIMB-Principal have long been on the market, there is little experience of Islamic firms in Germany.

"German firms are making Islamic bond portfolios and investment funds available," manager Karim Zaazou said. "But they only offer these products in Arab countries, to get a share of the petro-dollars."

Scandal casts a shadow

CIMB-Principal's plan is not the first to try and encourage Islamic investment in Germany. In the 1990s, Commerzbank and the state of Saxony-Anhalt developed a Islam-compliant bond known as a "Sukkuk." But the scheme was undermined by a scandal concerning share certificates.

Some 300,000 Muslims invested in one product, known as the "Konya model," only to see its Turkish operators disappear with the money. The damage was estimated at five billion euros.

Based on this experience, the general secretary of Germany's second largest Muslim organization does not think the Turkish community will be eager to invest in the new fund.

"There is obviously a need to apply one's religious principles in investing," Milli Gorus said. "But there is also a great deal of scepticism because of the past."

CIMB-Principal's first phase in Germany might come to nought. But you don't have to be religious to be interested in a good investment. The firm might not make headway in Germany until its second phase begins – unless this latest attempt at Islamic investments falls by the wayside like others before it.

(D.W / 12 May 2012)

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Germany Tastes Islamic Finance

Staying reluctant for years to taste the booming industry, Germany is finally getting Islamic investment funding as the globally-thriving industry is already making inroads into the European country’s economy.

"Islamic finance is for everyone," Daud Abdullah, president of the Global University of Islamic Finance in Malaysia's capital Kuala Lumpur, toldDeutsche Welle.

"If you look at [Islamic finance] globally, 60 percent of investors are not Muslims."

Despite the impressive strides Islamic finance has achieved in several European countries, Germany remains wary to adapt its laws to the Shari`ah-compliant industry.

"I want to share the new i-word with you. It doesn't stand for iPad, iPhone or inflation–but for Islamic banking," Noripah Kamso, chief executive of Malaysia-based CIMB-Principal, said in a press conference in Frankfurt recently.But this attitude has changed after Islamic finance was introduced by Malaysia-based CIMB-Principal, the only registered Islamic investment fund in Germany.

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, 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.

The new Islamic finance targets Germany’s roughly 4 million Muslim residents, along non-Muslims.

"Most Muslims in Germany are from the second or third generation," Kamso said.

"Many of them have good jobs."

According to studies by the firm, 23 percent of German Muslims want to put their money in Islamic investments.

CIMB-Principal's second phase is to target non-Muslim investors, a hard task in the shadow of little experience of Islamic firms in Germany.

"German firms are making Islamic bond portfolios and investment funds available," manager Karim Zaazou said.

"But they only offer these products in Arab countries, to get a share of the petro-dollars."

Germany has between 3.8 and 4.3 million Muslims, making up some 5 percent of the total 82 million population, according to government-commissioned studies.

Safe Investment

Bankers believe that the booming Islamic finance industry would easily gain the confidence of German investors.

"If people invested more in Islamic finance, the world would not have such problems," said Abdullah, the president of the Global University of Islamic Finance in Malaysia's capital Kuala Lumpur.

"Then we wouldn't have highly speculative instruments that provide no economic benefit, but get countries deep into debt."

Islamic banking is one of the fastest growing financial sectors in the world.

Islamic financial products got their first major boost after the 9/11 attacks on the United States.

Many Arabs withdrew their money from the US at the time, and some of those funds, according to Abdullah, ended up in Malaysia and the Gulf states.

A second boost came during the international financial crisis, when Islamic financial products actually showed profits.

The Dow Jones Islamic Market Titans Index, which tracks the 100 biggest Islam-compliant businesses in Europe, the US and Asia, has nearly doubled over the last five years.

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 amounting to $1.6 trillion (1.2 trillion euros).

(On-Islam / 13 May 2012)

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Alfalah Consulting - Kuala Lumpur:
www.alfalahconsulting.com
Islamic Investment Malaysia:
www.islamic-invest-malaysia.com