52 Islamic Finance in Practice
Lessons for Europe
Although the take-up of Islamic financial products has been slow, there is
increasing demand for these products in the market. As Islamic finance
spreadsinretailandinvestmentmarkets,itbringswithitvariouschallenges.
Therefore, the regulatory framework must be continually reviewed and
amended with the support of the relevant government and financial
authorities as to meet these challenges to allow the effective governance of
the sector and most importantly to provide a solution to the recognized
predicament of the Muslim community and their specific need for Islamic
finance.
In European countries, the foundation of the Islamic housing finance
services and products is yet to be set and the process is at its initial but
budding stage. The European Muslim population is relatively large;
particularly the French Muslim population which is nearly three times
larger than as the British Muslim community, with proportionately high
populations in Germany, Netherlands and Denmark as well.
In May 2008, the Dutch central bank and the Netherlands Authority for
Financial Markets published a statement in which they informed of possible
developments in the Netherlands. However, they also stressed their concern
over the lack of knowledge of the Islamic finance sector.
There is need for much understanding and education of Islamic finance
globally amongst suppliers, consultants and consumers. The education
about Islamic finance within the legal consumer protection framework is
necessary in order to attain a level playing field with the conventional set-
up.
With the foundation of Islamic home financing already put in place in the
UK, it is anticipated that there will be increased impetus for the growth of
Islamic financial services in Europe. Europeans should consider the risks
and challenges that the UK has faced in theprocess of implementing Islamic
home finance and benefit from the experiences in the UK in order to facilitate
Islamic finance in their countries. Clearly there are large groups of Muslims
in Europe that would benefit from Islamic home finance and this would
facilitate social and financial inclusion in those countries. If the willpower
of European authorities to implement Islamic finance to the retail sector is
there then appropriate legislation with respect to taxation and the financial
regulatory authorities can be enacted. This has wider benefits as it
demonstrates that countries wider commitment to Islamic finance, and
helps position them to take advantage of the significant inward investment
opportunities emanating from the Gulf.