Islamic finance in the European Union may be taking a back seat
as the continent is gripped with a dire euro zone sovereign debt crisis
which has even impacted on sovereign Germany's attractiveness as a bond
investment asset class.
Similarly, London's role as a hub for Islamic finance, investment and
trade - the declared ambition of the previous Labor government and the
current Conservative-Liberal Democrat Coalition - is stalling because of
the disappointment of the UK Treasury deciding not to raise funds in
the wholesale sterling market through a debut sovereign Sukuk.
Luxembourg and France have also introduced tax neutrality measures to
facilitate sukuk and other Islamic financial products, but have yet to
commit to issuing a debut sukuk, claiming as the UK does it is not the
right timing nor at the right price.
Southern Europe has had
hardly a look in. The reality is that Spain, from a historical context,
should be spearheading the dialogue and cooperation with Islamic
finance. And yet it is the UK that has been leveraging its vast colonial
experience with the Muslim world and its pre-eminent position as the
world's largest financial center. Not surprisingly, London in the early
1980's emerged as the major center for structuring Islamic financial
transactions such as commodity Murabaha and structured finance out of
Perhaps times are changing. On Thursday, a new
collaboration between the prestigious Instituto de Empressa Business
School in Madrid and the Jeddah-based King Abdul Aziz University will
get a second wind in the Spanish capital with the relaunch of the
Saudi-Spanish Center for Islamic Economics and Finance (SCIEF), which
was formerly the Center for Islamic Economics and Finance.
launch will be held in conjunction with a one-day conference on “Islamic
Finance in the 21st Century” at the Instituto de Empressa Business
School in Madrid which will be inaugurated by Professor Osama Tayeb,
president of King Abdul Aziz University and Professor Rafael Puyol,
chairman of the board of directors of Instituto de Empressa. Ahmad
Mohamed Ali, president of the Islamic Development Bank, is scheduled to
give the keynote address.
Perhaps it is pertinent that the
proceedings will also see the launch of a timely book, titled “Islamic
Economics and Finance: A European Perspective” edited by Professor
Cristina Trullols, director of SCIEF, and Professor Abdullah Turkistani,
acting dean, Islamic Economics Institute, King Abdulaziz University.
will also be a panel discussion on the role of Islamic finance in
universities and its development and expansion; a presentation on
investment opportunities for the Islamic finance sector in the Spanish
economy; and a summing up by Celia de Anca, director, center for
diversity in global management and a specialist in the Arabic language,
and Hisham Bardesi, dean of distance learning at Instituto de Empressa.
week's event," explained Turkistani, "comes in a critical economic
situation of the world and particularly Europe. The sovereign debt
crises in different European countries call for not only liquidity but
also for a new way of finance. Islamic finance could be one possible
solution. However, it is a long run process to benefit fully from the
principles of Islamic finance. Education, in fact is one important
channel through which knowledge and awareness of these principles could
be built, operated and transferred into the new generation of people and
institutions. The Saudi Spanish Center for Islamic Economics and
Finance is a collaboration between parties, one with the state of the
art in technical know how and the other party with a rich natural
resources of values and principles. Together they can draw a road map
for economics and finance of the next century."
One of the
challenges of SCIEF would be how to translate ambition into a coherent
and pragmatic program of independent education, research and
One area beckoning to be leveraged is historical
research. Muslims, for instance, ruled Spain for centuries. During this
time, relations between the three Abrahamic faiths - Judaism,
Christianity and Islam - flourished. So did scholarship, the arts and
yes business and trade. At the same time there were extensive links with
other rulers in Damascus, Istanbul and Baghdad.
One project for
SCIEF could be to research the Islamic financial transactions prevalent
in Al-Andalus and elsewhere in Spain during the rule of the Muslims, and
to see what relevance they may or may not have for today's Spain.
is a precedent. Turkish academics for instance are doing valuable work
on similar financial transactions used during the Ottoman Empire
especially relating to Waqf and Ushr (agricultural taxes). This has
resulted in some pioneering books being published on this work. The
Ottomans through its Mejelle were also the first to try to codify the
Shariah, or at least some parts of it.
Perhaps in the
Saudi-Spanish context, the challenge is even more daunting. Despite the
fact that Saudi Arabia is arguably the largest market for Islamic
finance and has the largest liquidity, Islamic finance and Fiqh
Al-Muamalat (Islamic law relating to financial transactions) still needs
to be demystified to both regulators and ordinary customers.
Spain the task is even bigger especially in the context of the growing
Islamophobia that has swept Europe and North American the post 9/11 era
which wrongly associates Islamic finance with political extremism.
the extent of Islamic finance's Spanish challenge at the frontline
business level could not be better illustrated by the latest first half
2011 attributable profit of Banco Santander, the only Spanish global
banking major. Some 50 percent of profits were generated from the US and
South American markets; and the other 50 percent from retail Spain,
Germany and the EU. Not a single euro was generated from the Middle
East, Asia let alone Islamic finance.
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