France: Senate looks at easing limits on Muslim finance

AKI :The French Senate is looking at ways to eliminate legal hurdles, particularly levies, for Islamic financial services and products in France and the potential for listing companies on the Paris Stock Exchange. The Senate said its initiative was consistent with recommendations from a report on Islamic finance prepared by the Financial Affairs Commission last May.

The report stressed the great importance of Islamic finance in France and indicated the legal amendments required at a financial level to adapt French laws to the Islamic financial system.

Senate sources said that this area of the financial market was worth from 500 to 600 billion dollars and could grow by an average 11 percent a year.

Last month French Finance Minister Christine Lagarde announced France's intention to make Paris "the capital of Islamic finance" and announced several Islamic banks would open branches in the French capital in 2009.

Lagarde said at least three banks had requested permission to operate in France - the Qatar Islamic Bank, the Kuwait Finance House and the Al Baraka Islamic Bank of Bahrain.

According to an opinion poll condcuted last May, around 500,000 French Muslims are interested in Islamic banks.

France, Hoping to Attract Gulf Wealth, Promotes Islamic Finance

The French government, anxious to attract some of the Gulf-based investment currently flowing to London, is promoting Islamic finance, offering it a more accommodating legal and fiscal framework in France.
Economy Minister Christine Lagarde, recently addressing Gulf investors, pledged to take steps "to make (their) activities as welcome in Paris as they are in London and elsewhere."

Analyst Emmanuel Volland of the ratings agency Standard and Poor's noted that this was "the first time that a representative of the state has said publicly that she is favorable to the development of Islamic finance.

"It's a strong signal and the players are listening."

But at another agency, Moody's, Anwar Hassan, cautioned that government pronouncements "are not in themselves sufficient to ensure the blossoming of Islamic finance here."

He said the government should not be content simply to reduce "legal or fiscal irritants" but should -- for example -- issue Islamic bonds, known as "sukuks," as Britain plans to do next year.

The challenge is also not purely technical or limited to establishing an infrastructure receptive to Islamic finance, he said, adding that convincing the French public of the soundness of such investments would be the real test.

The task, he argued, was to show that they are "an ethical, modern finance alternative."

Islamic law proscribes the paying of interest for a service as well as speculation, and prohibits investment in sectors such as pornography, gambling, weaponry, alcohol or pork products.

Hassan warned too that investors in the Gulf or Malaysia might see France's current interest as simply trying to "make sure that some of the oil wealth gets recycled in France."

Islamic finance, a market estimated to be worth 700 billion dollars (441 billion euros), does exist to some extent in France already. The leading Gulf investment funds, Gulf Finance House, Qatar Islamic Bank, Barwa Real Estate or Quinvest, currently have offices in the Paris suburbs.

Hassan noted that the establishment of an investment fund, compatible with Islamic law, in the French Indian Ocean island of Reunion by the bank Societe Generale "could attract savings from French Muslims."

Societe Generale has said it has no plans to set up a comparable operation in metropolitan France.

Eventually the offer of Islamic bonds could provide an alterative to French companies currently penalized by increasingly costly bank credit.

For the moment, however, France does not offer Islamic banking services, despite having the largest Moslem community in western Europe.

In Britain, the Islamic Bank of Britain was launched in 2004, the first such institution in Europe. About 20 traditional banks in Britain also offer Islamic banking services.

But Mohamed Damak of Standard and Poor's cautioned that the profile of the Muslim community in France is different from that of Britain.

"It seems to favor the transparency of conventional banking," he said, adding that it was "simplistic to think that because there are twice as many Muslims in France as in Britain, that the demand is going to be the same."

Paris forum stresses significance of GCC sovereign funds

A fundamental shift in global finance has thrown the GCC countries into full glare of the world spotlight amid surge of GCC sovereign funds.
The rise in importance of Gulf region Sovereign Wealth Funds has been ongoing for some months, but yesterday at the International Financial Forum in Paris, staged by Paris EUROPLACE, the organisation promoting Paris as a Financial Market, the evidence of the GCC's influence was stronger than ever.

Attendees included more than 1,200 representatives of investors, banks and financial institutions, French and international issuers, as well as a large delegation of the GCC member countries and high representatives of the European Commission and Parliament.

The topic of the forum was "the contribution of the Paris Financial Centre to the global economy", which included 3 GCC-focused panel discussions showcasing the growing importance of the GCC region in global finance and the positioning of Paris as a welcoming and responsive financial centre for global funds. The panel discussions stole the show: they were largely oversubscribed and there were rows of people standing at the back of the room.

The large GCC delegation - led by Dr Nasser Saidi, Chief Economist of Dubai International Finance Centre (DIFC), Jean Paul Villain, Head of Strategy Unit of Abu Dhabi Investment Authority (ADIA), Arif Sherani, Director of Investment Strategy of Qatar Investment Authority (QIA) and Tom Healy, CEO of ADX (Abu Dhabi Exchange) - was on a mission to explain the opportunities offered by the Gulf areas and succeeded in seducing European investors, bankers and media.

The 3 sessions were: "The role of long term investors in the global economy", "GCC cooperation opportunities", and "Islamic finance developments".

Each was vastly oversubscribed, an interesting fact in a country such as France which has had a recent history of economic patriotism.

The role of long-term investors in the global economy (plenary session) underlined the shift of capital to the southern hemisphere, where the capacity on saving averages 50% to compare with 15% in the North, but also the emergence of SWFs as long-term investors together with pensions funds or central banks. The growing financial capacity of SWFs, their long term investment policy and their will to collaborate on policy principles were all highlighted.

De Romanet, CEO of the Caisse des Depots (the French State Fund), underlined the role of the SWF in the global market, and their growing capitalization "from 3 000 billion today to 15 000 billion in the near future". For him, "SWFs are no more or less than institutional investors and I invite them to join the Caisse des D?p?ts, in the Global Institutional Investors Club that I am setting up." Villain from ADIA and Sherani from QIA insisted on the need for continuous dialogue.

Dr Nasser Saidi from DIFC underlined that "in the 70s and 80s, the petrodollars were coming in and out without benefiting the economy, there was no stock exchange, no financial market to leverage the benefits of that flow. Now that we can control that wealth and invest it, foreigners are welcome to come, operate, and list their companies on one of the region's stock exchanges.

He added that "The region is growing fast, 11% a year. At this rate the GCC will be the 5th biggest economy in 2020 and its single currency will emerge as a global currency alongside the Euro and the Dollar." Dr Saidi also called for stronger ties between Europe and the GCC countries, a sentiment backed by the Abu Dhabi Exchange whose representatives signed a strategic partnership agreement with NYSE Euronext.

Tom Healy the CEO of ADX, who said: "The advantages of cooperation are far bigger than merely technical; the expertise and people are more valuable." He invited the best EU organisations and companies "to contribute to and benefit from the current growth".

NYSE Euronext a member of Paris EUROPLACE has signed a number of agreements with Financial markets in the GCC region, the most recent being the acquisition of 25% of the Doha Securities Market for USD 250 M, the biggest investment made by NYSE Euronext in a foreign Stock Exchange.

The session on Islamic Finance Developments boasted an impressive panel of regional and French specialists and explained the mechanism of Sharia-compliant finance. It underlined the growing importance of Islamic finance, which is predicted to grow from its current US$800 million to US$1.4 trillion in 2010. It currently represents 20 to 30% of all GCC banking activities in the GCC region.

Christine Lagarde, France's Minister of Economy, Industry and Employment, highlighted the initiatives, inspired by Paris EUROPLACE committees, more particularly those concerning the development of Islamic finance services on the Paris financial marketplace.

The French law already offers the best flexibility and adaptability to welcome Islamic finance operations. Nevertheless, new measures are currently under way with the set up of a new framework for Sharia's compatible asset management instruments by the French financial authority (AMF). Some measures including tax incentives are on track, aimed at facilitating Islamic banking and takaful products as well as Sukuk issuance which will make Paris an attractive center for Islamic Finance.

New initiatives have been decided by the AMF in order to facilitate the issuing of Sukuks on the Paris Stock Exchange and tax incentives are being studied to ease Islamic banking and insurance operations (takaful).

Paris EUROPLACE is the organisation which promotes Paris as a financial market. It represents the major players in the financial market, namely corporate issuers, investors, brokerage firms, banking institutions, market authorities, law, accounting and consulting firms, and professional associations. Its main strength is bringing together the multiplicity of players in the financial industry.

France not yet capitalising on Islamic finance, says Moody's

Doha - The French market has the strong potential to become a thriving market for Islamic finance but it has yet to capitalise on this opportunity, according to Moody's Investors Service in a new 'Special Comment'.

The new 'Special Comment' entitled "Islamic Finance in France: Strong potential, But Key Obstacles Persist" describes the key legislative, regulatory, technical and commercial changes that would be necessary for the successful introduction of Islamic finance in France, as well as examining the social and political obstacles to be overcome and the lessons to be drawn from the UK's experience in this area.

The rating agency said the obstacles relate less to the legal changes that would be necessary and more to social and political aspects. "France's Muslims constitute the biggest Islamic community in the Western world and the major French banks have strong roots in the Muslim world. However, despite this, these institutions' share of the burgeoning Islamic financial industry remains negligible," said Anouar Hassoune, a Moody's Vice-President/Senior Credit Officer and author of the report.

"The French financial and banking system does not, as yet, offer access to a range of alternative products and services in line with Islamic principles, despite offering the necessary advantages to develop a thriving market as well as the potential to become a test bed for innovative ideas and techniques." The introduction of Islamic financial services would offer obvious benefits for the French economy in general and for French banks and businesses, not only as a source of liquidity and finance but also as a springboard for targeted growth and increased diversification, according to Moody's.

"In addition, French law appears to be sufficiently flexible and open give or take a few adjustments to accommodate Islamic financial principles and products without any major upheaval. The example of the UK and moves from foreign Islamic banks to apply for licences in France shows that legal and fiscal adjustments can give rise to a thriving Islamic finance market," Hassoune observed.
Moody's explained that the main area of hindrance relates more to symbolic social and political aspects that, to date, mean that France has been unable to develop an 'industrial' version of Islamic finance.

"On the one hand, France is seeking to attract surplus oil wealth from the Gulf region, but at the same time is running the risk of erecting barriers to establishing its own market for Islamic finance," Hassoune said.

France to host meet on ‘Islamic finance’

PARIS (KUNA): The French Senate, or upper house of parliament, announced here Thursday that it is organizing two round table discussions May 14 to examine the role France can play in attracting Islamic funds and the opportunities opening up to work with Islamic funds on international finance markets. The sessions will be presided over by the Senates Finance Commission president Jean Arthuis and will include participants from a variety of financial and investment bodies.

The first round table will examine “the integration of Islamic finance in the global financial system” and seek to determine the challenges for France in this area, the Senate said in a statement. According to the statement, Islamic funds are now valued at around 700 billion dollars and have a “recognized growth potential” but these funds remain centred in the Middle East and Southeast Asia, where they continue to grow.

“This growth is drawing strong interest, including in Europe, where many are asking what way they can integrate this alternative finance beside conventional activities,” Arthuis said in announcing the meetings. He noted that as of 2004 Britain stands out in this area because it made necessary adaptations “by proposing adapted services to the Muslim community thus making the City of London the place of reference for Islamic finance.” At the first round table, there will also be a discussion of how French operators can work with the Islamic funds by respecting the specific conditions that govern them, specifically Islamic law.

Participants at the first round table will include Zubeir Bin Terdeyet, Director of Isla Invest, Maya Boureghda, a legal counsellor at BNP Parisbas, Anwar Hassoune, vice-president of Moodys rating company, Vincent Lauwick, SGAM Asset Management, London, Jean Francois Pon from the Federation of French Banks and Gilles Saint Marc, a lawyer from AARPI.

The second round table will address “the development of Islamic Finance” and the requirements to adapt legislative or regulatory frameworks to work with these funds. This round table will especially examine “juridical or fiscal obstacles that may prevent the development of Islamic finance in France,” the Senate said.

This could relate, for example, to the way banks receive Islamic banks on (French) soil, or to the juridical and fiscal structures that need to be put in place to integrate Islamic finance into the French system, all the while respecting the conditions employed by the Islamic banks.

Questions on financial instruments, such as Islamic bonds (sukuk) and other investment products will be addressed at the second round table, which will include participants from Western investment institutions and draw on the experience of London as a financial centre working with Islamic finance.

France has been reflecting, both at government and private level on how to increase its financial activities with sovereign funds in the Islamic world and Senator Nathalie Goulet, vice-president, of the France-Kuwait Friendship Committee recently told KUNA that this is becoming an area of strong focus for the French and that France wanted to intensify contacts on how cooperation could be enhanced with Gulf countries in the area of sovereign funds and their investment in this country.