Thursday, September 10, 2009

Retail questioned as France pushes Islamic Finance: Reuters

France's quest to create a new European hub for Islamic finance could soon yield results for wholesale banking and Islamic bonds, but concerns over the image of Islam may put the brakes on retail banking. Since launching a drive to develop Sharia-compliant financing and draw Middle Eastern capital to France around two years ago, Paris has made large strides on the legal and fiscal front, with much of the framework already set, according to an analysis by Reuters.
The report says expectations are growing that it might be a matter of months before a firm or local authority issues France's first sukuk bond, which pays no interest but offers returns on underlying physical assets, and licences Islamic banks, adding that the country's tiny Islamic finance market has so far largely involved Sharia-compliant property deals, a far cry from neighbouring Britain, which has spent the past five years positioning itself as a major Islamic banking centre.
Whether the size of the French market can really top 100 billion euros ($144 billion) in time, as suggested by two French professors in a 2008 report, is debatable. But analysts reckon there will be a stream of Sharia-compliant property or corporate financing deals and some sukuk issues over the coming two years in a country which has over five million Muslims, Europe's largest such community, it added.
"On the retail side, I think there is a very big question mark," the report quotes Anouar Hassoune, senior credit officer with Moody's.
"Otherwise 18 months is doable in terms of concrete activity and it could go quicker than that."
Beyond possible reticence on the part of the French body that issues banking licenses to go for retail before the wholesale side has been tested, the report noted that thousands of bank staff will need to be trained in the coming years. It then noted that the 'biggest challenge' posed by retail banking is overcoming prejudices towards Islamic finance in a nation that prizes its secular traditions and where some think the general public will mix the notion of religion with banking.
That could explain hesitancy on the part of French banks, which have developed Islamic finance for overseas markets but steered clear of it at home, some analysts said, it added.
The analysis quoted an unnamed industry expert as saying: "The crux of the problem is that nobody wants it except for the Muslims and the Muslims have no power in France. They are not organised enough and have no lobbying power to see Islamic retail banking see the light of day."
What may happen? The article suggests that if Islamic retail were to emerge, it would probably start with a partnership between a French and overseas bank, and would need to be carefully marketed. "You can't have a bank called the French Islamic Bank. It would be best to talk about alternative financing," Jean-Paul Laramee of the French Institute of Islamic Finance was quoted in the analysts.

1 comment:

Simon said...

Islamic Finance is a big new area of interest for banks and financial services. Interesting..