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.
[...] So far, most of the hindrances to the development of the Islamic finance industry in France have been related to political of psychological barriers. Political barriers are usually the result of French reluctance to seemingly go against “sacro-sainte” secularism. When amendments enabling the issuance of sukuks were to be made to the Civil Code by a law voted on September 17th 2009 (relative to the article 2011 on fiducie), some socialist representatives declared their indignation, claiming that France should not modify its law to accommodate Islamic finance: this would be a threat against the French secular tradition. [...]
[...] Developing Islamic finance would be a way to attract more petroleum dollars and set a foot into a market currently dominated by South-East 1 Islam and International Relations Asia and the Persian Gulf. Thanks to the development of Islamic finance, the Ministry of Economy and Finance plans on attracting billion by 2020. Second, given that Islamic finance is not exclusively targeted at Muslims and that it has many advantages over traditional finance, it could benefit nearly everyone in France. Indeed, the principles on which Islamic finance is founded make it structurally less sensitive to the speculation problem and, thus, inherently less risky. [...]
[...] 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. [...]
[...] III the year of Islamic finance in France? None of the aforementioned criticisms seem to be able to hinder the development of Islamic finance in France in 2011. Indeed, the financial crisis made the need for ethical finance more acute, and the continuous growth of Islamic finance during the crisis helped revamp its image. Because it prohibits excesses in corporate leverage and forbids speculation, Islamic finance appears as a stable and long-term oriented alternative to traditional finance. Convinced that 2011, Islamic finance will be a driver for the French economy and the banks”, Christine Lagarde strongly supports the introduction of Islamic finance in France. [...]
[...] Conveyed by some media, the association of Islamic finance with terrorism, for example, influences the collective psychology of the French people and could yield to burning debates if full-fledged Islamic banks were to settle in France Islam and International Relations Additionally, a critique issued by Muslim investors themselves has been that the presence of Islamic finance in France would further recycle the oil money in the West, instead of investing it in the Islamic world. For this reason, some criticisms have been raised from the Muslim world itself regarding the introduction of Islamic finance in France. [...]
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