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"Politicians are very wary," said Mogaddedi. |
FRANKFURT — Unlike major European players, Germany remains reluctant to embrace Islamic finance within its legal and tax systems though the globally-thriving industry is already making inroads into its economy.
"The German legal and financial system is not yet geared towards the development of Islamic finance," Zaid el-Mogaddedi, president of the Institute for Islamic Banking and Finance in Frankfurt, told Agence France Presse (AFP) on Sunday, November 23.
Despite the impressive strides Islamic finance has achieved in many European countries, particularly Britain, Germany remains wary to adapt its laws to the Shari`ah-compliant industry.
"Politicians are very wary," said Mogaddedi.
Officials claim certain Islamic funds are shaky and sometimes lack in transparency.
An internal Deutsche Bank survey in 2007 argued that the Islamic money market is based on commodity trading by brokers who are not very reliable.
Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.
Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.
Volker Nienhaus, president of Philipps University in Marburg and a researcher of Islamic finance, cites the lack of huge Muslim investments in Germany as another factor.
"Unlike in Britain, not many rich families from the Gulf have settled in Germany," he said, adding that the Turkish community puts its money in savings banks like everyone else.
Germany is home to some 3.2 million Muslims, over half of whom are of Turkish origin.
Inroads
Despite the lack of government support, Islamic finance is already making considerable inroads into Germany's economy, Europe's biggest.
Driven by the huge potential client base, German banks were early in offering products which conform to Shari`ah, but only outside Germany.
Since 2005, Deutsche Bank has been issuing Islamic bonds (Sukuk) in cooperation with Saudi banks.
Dresdner Kleinwort, a subsidiary of Dresdner Bank, co-organized a similar issuance of one billion dollars in Bahrain in 2007, said Simon Grieser, company lawyer at Mayer Brown in Frankfurt.
Islamic investments are beginning to move into the German property market.
Arab Investments, originally based in London, has already acquired 400 million euros' worth of commercial property in Berlin, the southwestern city of Karlsruhe and Dresden, the capital city of the Federal Free State of Saxony.
Lars-Oliver Breuer, from the real estate company Savilles in Hamburg, expects Arab investors to pump a further 300 million euros in 2009.
Islamic finance is already one of the fastest growing sectors in the global financial industry.
The Islamic banking industry, which began almost three decades ago, has made substantial growth and attracted the attention of investors and bankers across the world.
Currently, there are nearly 300 Islamic banks and financial institutions worldwide whose assets are predicted to grow to $1 trillion by 2013.
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