2021 has shown a certain resilience of Islamic finance in France. The players present in the market have succeeded in adapting to the difficult context while developing. The offerings available in the market in real estate financing and savings have made it possible to address a wider clientele, and the market players continue to develop.
It remains quite apparent that, despite its potential, Islamic finance remains a niche. This can be a strength in a conventional market, but it can also be a weakness if we consider a country where the offerings in the field of savings tend to be oriented toward the real economy and to the exclusion of investment in sectors that pollute or have a harmful impact. This is also the case when, in the field of real estate financing, the normalization of low rates tends to influence the Muslim consumer in his choices.
Review of 2021
Savings market
Muslim consumers appear to be increasingly aware of, and seeking, savings solutions. A leading player in the market like 570easi has responded to this demand by continuously developing different Shariah compliant solutions covering the different savings needs of Muslims. These solutions cater to a more and more well-informed public concerned with valorizing their financial assets while reconciling their faith, performance and security, together with an environmental protection approach.
Muslim consumers have access to real estate savings solutions for offices and businesses located in all major French cities (approximately 30 million real estate assets), as well as a life insurance policy offering various Shariah-certified funds, including an infrastructure fund, a world’s first for the general public. They will also benefit very soon from a PER retirement savings solution allowing them to save while benefiting from taxable income deductions.
Other players such as First Union or Sunna Kapital also offer some of these solutions but in a more confidential manner and in smaller volumes.
Murabahah real estate financing market
In 2021, the dynamics have been interesting with regards to Islamic real estate financing. The production of Murabahah has been sustained, driven by an exceptional 2020 with a strong demand from Muslim consumers.
Market players reached their annual production of 2020 by August 2021. At the end of 2021, demand remained strong and we even saw a certain acceleration with a return to the market of properties available for sale.
The players continue to invest in this market by expanding their teams and developing their presence throughout France to be able to support this growth.
Preview of 2022
For the main players in the market, the last few years have allowed them to consolidate and validate their model. Muslim customers are increasingly vocal about their need for Shariah compliant solutions.
For 2022, it will be a question of consolidating and developing in a significant way the outstanding amounts in savings and also in Murabahah.
A major recruitment and structuring effort is underway at most of the major players in order to be able to absorb a greater volume of savings and real estate financing investments.
The current trend in favor of ethical and socially responsible investment gives additional legitimacy to Islamic finance as alternative finance. This is also the direction that some Islamic finance players are taking, choosing a more neutral but still differentiating marketing positioning.
However, the number of players offering Islamic finance solutions is still too small to serve customers effectively. The Islamic clientele is increasingly expressing its need to see new players emerge in order to be able to compete and to have alternatives to the traditional players.
Some initiatives are emerging, but too scattered at the moment.
Conclusion
Islamic finance in France was able to develop in 2021 despite a context marked by uncertainties. This seems to be a good sign for the future with new solutions available, especially in savings, and a strong acceleration of the players in this field.
However, the players and the available offerings remain too embryonic and we feel there is a real need for novelty as consumers are demanding more and more from the players.
Karim Bahroune is the financial advisor and founder CEO at Blue Simple. He can be contacted at [email protected]