INTERNATIONAL. France is maneuvering for a part of the Islamic finance business, with expected fiscal and legal adjustments as announced in July 2008 by the Finance Minister, said Standard & Poor’s Ratings Services in a report published today titled ‘Islamic Finance In France: Paris Tries To Reduce The Gap With London’.

“Islamic finance has been one of the most dynamic asset classes over the past decade with total assets exceeding US$600 billion, and we believe that the industry will continue growing at double-digit rates in the foreseeable future,” said Standard & Poor’s credit analyst Mohamed Damak.

Over the past five years, London has built up its Islamic finance capabilities through regulatory and fiscal adjustments, the licensing of five Islamic banks (four wholesale banks and one retail bank) and a Takaful company, and the authorisation for conventional players (estimated at about 20) to offer Sharia compliant products in the UK.

The French have lagged the British over that period, but recently the French government signaled a change in attitude. It is set to adjust its fiscal and legal framework to render it friendlier to the development of Islamic finance. The recent communication from the French Ministry of Finance asking the relevant government administrations for the fiscal and juridical clarifications and modifications necessary to facilitate Sukuk issuance and structured real estate transactions–in particular regarding registration rights–came as no surprise and was welcomed by market participants.

By preparing the ground for Islamic finance, France can help financial innovation and benefit from the deep pockets of Middle Eastern investors as liquidity has dried up elsewhere in the global financial markets.

“We believe there is good potential for Islamic finance in France, although its development will be gradual in our opinion,” said Damak. “At first, we expect mainly wholesale banking and sukuk to fuel growth. Some uncertainties persist regarding the development of Sharia compliant retail banking services, despite the fact that France has the largest Muslim population in Europe.”

The report is available to subscribers of RatingsDirect, the real-time web-based source for Standard & Poor’s credit ratings, research, and risk analysis, at


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