2020 has been a tough year for everybody and for the Italian economy in general. Never before in the history of the Italian Republic have we been faced with a health, social and economic crisis of such magnitude. As commonly known, a wholly unpredictable shock hit the Italian economy in February 2020, as COVID-19 began to spread nationwide. The economic forecasts are not good, but the Islamic finance field could offer good perspectives.
Review of 2020
With regards to Islamic finance, it must be said that in Italy, during 2020, economic players and public authorities have shown a growing interest in Islamic finance and also business operators have become more and more interested in the markets of the Muslim world, due to the fact that they are realizing the many opportunities that Islamic finance offers.
As a consequence, these players have increasingly requested innovative instruments for internationalization and are continuously trying to implement new strategies to access the Islamic finance field.
As an example, during October 2020, international financial services group Almalia, after the first launch in London, listed the world’s first active global equity Shariah compliant exchange-traded fund (ETF) on the Italian stock exchange as well. The operational distribution and marketing support is provided by HanETF, a so-called white label platform that helps asset managers to bring new ETFs to the market, while an Islamic finance consultant oversees the investment screening process to make sure the ETFs remain consistent with Shariah principles. It is clear how this process has opened up a new avenue of growth in Europe’s fast-expanding US$1.1 trillion ETF market.
Also, the promotion of Italy’s mark of quality represents a unique opportunity for Italian companies and firms to expand their markets to the Muslim communities in the Mediterranean area and in the Middle East and to strengthen their business, so there is a deep interest on the accreditation process to get Halal certification from the Halal certification bodies based in Italy.
Preview of 2021
The consistent interest shown in the last few months will increase and the aim is to make finance practitioners more familiar with the process by which Islamic banks are introduced into a conventional system. An increasing number of commercial banks are considering the possibility of offering Islamic financial products and opening Islamic windows to reach a potentially new clientele, but the fact is that we are still waiting for a legislative road map that, by now, has remained in the drawer.
To achieve the implementation of one of the models that would authorize an Islamic bank to operate in Italy, it is necessary to provide an answer to some specific characteristics of an Islamic bank relating, for example, to the security of deposits, rather than to the requirement, that concerns all banks, to invest a part of the liquidity in “high-quality liquid assets”.
Lastly, despite the efforts of AAOIFI and the IFSB to have uniform standards of interpretation of the Islamic law, lots of uncertainties still exist with regards to the issuance of Shariah compliant financial instruments, but the hope is to reach less uncertainty in the future.
Looking back on 2020, but even more looking forward to 2021, the certainty is that the presence of an Islamic bank in Italy would be an advantage for Italian enterprises, which would have the chance to access new and alternative financing opportunities in addition to the ordinary ones already offered by conventional finance, and for consumers, not only of Muslim faith, who appreciate the financial services of an ethical bank.