Interest in Islamic finance is growing in Europe with leaders such as the UK and Luxembourg paving the way for new entrants to join the developing trend. DR SHARIQ NISAR introduces the newest contender to the game.
‘Islamic Finance and Sustainability: A New Business Model for Financial Centers?’ was the title of the all-day conference held on the 28th October 2014 in Liechtenstein, organized by the University of Liechtenstein and the Financial Market Authority Liechtenstein. A tiny country in the Alps, Lichtenstein has a total population of about 37,000, along with one of the highest per capita incomes in the world and the lowest rate of unemployment.
Prince Nikolaus von und zu gave a welcome address and Sheikh Mohamed Ali Elgari delivered the key note speech — ‘Islamic Finance Today’. The second keynote speech, ‘The Regulation of Islamic Finance in the Post Crisis Economy: Growth, Reforms, and the Stability Framework’, was delivered by Jaseem Ahmed, the secretary‐general of the Islamic Financial Services Board (IFSB), Kuala Lumpur.
Dr Andrew White, the director of International Islamic Law & Finance Center of Singapore Management University, Singapore, spoke on fundamentals of Islamic finance. Dr Matthias Casper, Professor of Law, Institute of Business and Capital Market Law at University of Münster, spoke on Islamic banking and corporate governance. Dr Omar Clark Fisher, the managing director of Khidr Solutions, made a presentation entitled Islamic Alternative to Insurance – Takaful and its Role in Building Wealth. David Gibson‐Moore, chief representative, LGT Bank, Bahrain, spoke on current trends in Islamic private banking. Dr Uwe H Steininger, the director of international fund structuring and Islamic finance at Valartis Fund Management (Liechtenstein), shared his thoughts on Shariah compliant alternative investment funds. Fares Mourad, the managing partner of Peak Values, Zürich, spoke on ‘Developing an Islamic Finance Private Banking Platform: An Insider’s View’.
After lunch the focus of the conference shifted to international standards, legal and regulatory framework. Omer Shaikh of Islamic Finance Council, UK spoke on establishing and enabling a regulatory framework. This was followed by my presentation on Sukuk structuring and standardization. Dr Dirk A Zetzsche of the University of Liechtenstein spoke on Islamic Finance, sustainable investment and social responsibility.
The final session of the conference was dedicated to exploring Islamic Finance – opportunities for Liechtenstein. The session started with my presentation on: Regulatory Preconditions for Developing an Islamic Finance Center. This presentation was followed by a high-level panel discussion moderated by Dr Urs Philipp Roth‐Cuony, the Chairman of Financial Market Authority Liechtenstein.
The author was asked to speak on ‘Regulatory Preconditions for Developing an Islamic Finance Center’. I presented a SWOT analysis of Liechtenstein as an Islamic financial hub and it was discussed by the experts. The key strengths analyzed by the experts included:
A safe economic and political environment in the center of Europe;
Stable currency and free movement of capital;
Very light tax regime;
An efficient banking system;
A highly modern infrastructure and good transport connections;
On the other hand major weaknesses identified by the experts were:
A late starter compared to other Islamic finance centers in Europe;
Negligible presence in Middle East and lack of first-hand experience in running an Islamic finance institution within the principality.
Considerable time was devoted to discussing opportunities for Liechtenstein. It was argued that more focus on standardization of Islamic finance will provide greater opportunity for established financial centres like Liechtenstein. Activities like Takaful, reTakaful and Islamic wealth management including Sukuk were considered more suitable for Liechtenstein.
Discussion on threats focused more on the current small size of Islamic finance for which many counties of the world are vying. Even within Europe some centers are already well-established and some more are about to enter the fray. Issues related to transparency and threats from money laundering also received due attention.
Based on SWOT analysis it was recommended that Liechtenstein should start with Sukuk and the Takaful segment. To achieve its goal the country needs to bring in legislation to harmonize and explicitly address mismatches in regulation affecting Islamic finance products. Following the examples of other centers in Europe and elsewhere, Liechtenstein needs to apply the same tax treatment to Islamic finance products like Murabahah, Ijarah and diminishing Musharakah as it applies to corresponding conventional products. Liechtenstein was exhorted to provide incentives to Islamic finance infrastructure institutions to set up shop. The crucial role such stakeholders play in the establishment of an Islamic finance center was demonstrated through two case studies (i.e. Islamic Finance Project of Harvard, US; and TASIS of India).
Summary and conclusions of the conference were presented by Dr Zetzsche along with the vote of thanks to all participants.
Dr Shariq Nisar is the director of TASIS India. He can be contacted at