The German Federal Financial Supervisory Authority, BaFin (Bundesbank
and German Federal Financial Supervisory Authority) sent two
representatives on an Islamic finance congress. Dr. Johannes Engels,
senior advisor and Robert Elsen, deputy head of the section for
technical co-operation, both contributed to the World Islamic Finance
Conference held this year in London, March 28/29. The conference
featured such prominent figures of the Islamic finance world as Sheikh
Nizam Yaquby, Shari'ah scholar from Bahrain who is a member of more than
80 Shari'ah-boards advising Islamic financial institutions and is
considered to be one of the top ten leading Shari'ah-scholars in the
world. The conference is not the first effort undertaken by the BaFin to
jump start Islamic Banking in Germany. (source)
In October 2009, BaFin, even hosted its first own conference on
Islamic finance which was well received in the press. It was the first
event of this sort and a major break-through in public awareness on the
subject. BaFin officials, including its president Mr. Jochen Sanio,
repeatedly signalled their willingness to support Islamic banking. The
conference was seen as the starting point to build up a regulatory
framework for Islamic banking in Germany.
Nevertheless, so far no Islamic bank has settled for the German
market. Asked why, Juergen Dreymann, another BaFin representative,
stated in June 2010 at a panel discussion in Frankfurt that until then
the BaFin had simply not received any applications for the opening of an
Islamic Bank. The authorities had not undertaken further steps to bring
forward the matter due to missing demand. The Kurveyt Trk Bank,
announced in the press as the first Islamic Bank to open in Germany,
started only by operating a representative office which will collect the
money in Germany but administrate and invest it through their home
offices in Turkey. The way to a full banking licence for a
Shari'ah-compliant institution in Germany is expected still to be long.
The framework of the German banking regulations still either does not
allow trade based Islamic transactions or does not consider them to be
banking transactions at all. Besides some of the tax regulations such as
VAT constitute a disadvantage for Islamic banking customers who would
be charged twice.
An extensive study by the German Federal Office for Migration and
Refugees (BAMF) found that 50 % 70 % of the 4.3 million Muslims living
in Germany call themselves religious. This correlates with the findings
of another study supported by the Institution for Islamic Banking and
Finance (IFIBAF) in Frankfurt, Germany, in which 72 % of the Turkish
answer that they would prefer to invest their money in Shari'ahcompliant
products. Further findings of the study show the market potential for
Islamic investment products to be about -1.2 billion per year with
overall cumulated savings of Muslim costumers between -22 billion 38
billion. Ernst & Young (E&Y), in comparison, estimates the total
assets of Muslims in Germany to amount to -20 billion, while the
Central Council of Muslims in Germany (ZMD) together with E & Y
assume in their study that 30 % 50 % of German Muslims are disposed to
execute financial transactions in accordance with Islamic principles.
German institutions are not hesitating to seize business
opportunities, be it conventional or Islamic. This is proven by Deutsche
Bank which opened -Islamic Windows in the GCC and in Malaysia and by
Germanys biggest insurer, Munich based Allianz, which successfully
launched Allianz Shari'ah in Indonesia in 2006 with a continuing annual
growth. Their focus on the Islamic finance market abroad may indeed be a
sign that the home market is still too small.
Gradually, though, Islamic finance does take a hold in Germany. In
March 2010, Meridio, an asset management company with headquarters in
Cologne, launched the first actively managed Islamic mixed fund broadly
advertised in Germany.
And the first Islamic bank, the Kurveyt Trk Bank is short of applying
for a full banking license. Their success will be one more indicator on
whether further expansion of Islamic finance will have a favourable
prognosis in Germany.
About the author
Rebecca D. Schoenenbach is an economist specialized in growth theory and moral economics as well as Islamic finance.
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