CAIRO – Germany has officially opened its first Islamic bank in accordance with Shari`ah laws in Frankfurt, offering the country’s Muslim population better chances of halal investments.
“We are proud to have this license. Hamad Al-Marzouq, board chairman of Kuwait Finance House (KFH), parent of Kuveyt Türk, told Kuwait News Agency (KUNA) on Tuesday, July 21.
“Exercising banking in line with the Islamic Shari`ah is very important not only for the German side, which seeks to boost Germany’s financial position, but for millions of clients wishing to use banking services offered by the bank in three Germany cities,” he added.
Marzouq was speaking during the formal opening ceremony held on 21 July 2015 in Frankfurt at KT Bank’s head office.
Ugurlu Soylu, general manager at KT Bank, said the new bank is expected to boost the real economy.
“Bottom line, for our customers there is no difference to paying for something with interest charges,” Soylu told the German news agency dpa.
He added that the Islamic banking has an advantage of the pool system allowing fewer risks which are more evenly distributed, and thus a total collapse of the system is less likely.
Using Frankfurt as its base, the new bank aims to tap Europe’s second-largest Muslim community, many of whose members are of Turkish descent.
Kuveyt Turk, the largest Islamic bank in Turkey and 62 percent owned by Kuwait Finance House, set up a financial services branch in Mannheim in 2010 and applied for a full banking license in 2012.
At the time, the lender said it would invest initial capital of 45 million euros ($48.7 million) in the planned German unit.
Islam forbids Muslims from usury, receiving or paying interest on loans.
Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.
Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.
Investors have a right to know how their funds are being used, and the sector is overseen by dedicated supervisory boards as well as the usual national regulatory authorities.
Over the past years, Islamic finance has been slow to gain a foothold in Europe.
Britain remains Europe’s main Islamic finance hub, with five full-fledged Islamic banks, with a Luxembourg venture also planning to launch an Islamic lender of its own.
In 2004, the German state of Saxony-Anhalt raised 100 million euros via Islamic bonds, with Munich-based FWU Group tapping the market in 2012 and 2013.