2022 was a rather calm year, yet with ground progress from the client’s perspective. Three new solutions were launched for French consumers, a record number from the previous year especially following the end of the COVID-19 crisis. The presidential election brought its lot of surprising news and sensible announcements regarding faith communities, but market forces on the ground are at work for a great step toward financial freedom and inclusion based on values.
Review of 2022
2022 has been a full year of recovery from COVID-19 with demand from clients for all types of investments and financings. There were clearly two periods during the year: the first semester with growth from the different segments of the markets and unfortunately, a higher inflation rate for the second semester which deteriorated quickly the economic conditions.
The areas of focus for 2022 were as follows.
• On the academic front: a new MBA course was launched by Financia Business School, with the same team that previously offered this course with University of Dauphine. This time, the focus was more on decentralized finance, digital platforms, fintech and alternative systems. The first batch of students had the opportunity to perform a study visit to the International Islamic Financial Market in Bahrain.
• On the insurance front: Sakina Takaful launched in 2020 a death and burial expenses cover and is going forward with the first new customers, addressing the go-to-market strategy through a network of not-for-profit organizations and burial services companies. Regarding life insurance, there is a new entrant in the French market: the Perenys platform offering a life insurance product with many unit-linked ethical investment funds along with a retirement plan savings product for individuals.
The Perenys team is composed of the former leadership team from 570easi and two financial engineers who worked for Amundi, the global asset management company with its fund and structured investment products team. From the feedback of the team, the main challenge is to reach a network effect through the largest distribution network including independent financial advisors, insurance brokers and self-employed distributors.
To get a better grasp of what is happening in the French market, it is important to understand the dynamics of both demographics and laws of demand and supply.
It is quite clear that all major financial institutions in France understand what Islamic finance is, at least from an economic potential point of view, but they see the market as not mature enough to launch any product or services.
The market thus far is still balancing between the growing French Muslim population, putting more graduates and potential consumers on the market, and the increase of ethical or alternative-based finance such as green finance, SRI, ESG or impact investing.
It is interesting to go back to consumers’ preference patterns. Up to 80% of French Muslims declare they prefer eating Halal and participating in Friday prayers in mosques (source: IFOP). The level drops to 57% when they express an interest in an alternative option for their savings, as they all have an account in a conventional bank. (source: AIDIMM).
In practice, there are around 10,000 to 15,000 retail clients who benefited from Islamic finance products overall in France, which represents a huge gap toward the potential of one million customers that market studies infer to.
We suggest that a good proxy to understand the French market trend is not comparing to any English cultural background countries but to a French-speaking country with local roots, whether in Africa or the Indian Ocean region.
The only SRI Shariah compliant property fund available in the market, distributed by Conexcap Finance and its network of distributors (agencies, franchises and intermediaries), has passed the EUR50 million (US$51.61 million) mark of assets under management.
Despite the relative growth of the retail mortgage and savings segment, other asset managers or insurance companies have been quiet and most of the local initiatives have been propelled by smaller entities, fintechs and neobanks with some start-ups taking the lead in promoting new life/death Takaful.
It is still Chaabi Bank with its network of local agencies that offer directly an account and a home finance solution along with its exclusive fintech platform, 570easi (including overseas territory in Réunion Island) providing the majority of its Murabahah-based financing volumes with its portfolio of approximately 3,000 homeowners.
Preview of 2023 and conclusion
A good opportunity for the French market is the capacity for the decision-makers to work in cooperation with entrepreneurs and start-ups to cater for their funding, from the early-stage ones to the more mature ones.
Anass Patel is the co-founder and CEO of Groupe 570. He can be contacted at [email protected].