ISLAMIC BANKING AND FINANCE IN FRANCE
The development of Islamic finance in France is ascribed to powerful encouragement by the French authorities, who have built an appropriate and warm atmosphere for such finance in this country.
Paris Europlace, the organisation that advances the city’s role as a financial centre, founded the Islamic Finance Commission in December 2007. Since then, the French financial markets regulator, the Autorité des marchés financiers (AMF), has issued two status permitting Shari’ah compliant investment funds and sukuk lists. As such, the Bourse de Paris (Paris stock exchange) has created a sukuk section and four tax ruling (relating to murabahah, sukuk, ijarah and istisna’) have been published that approve a parity of tax dealing with conventional financial products.
The French regulative authorities have taken a lot of steps to encourage Islamic finance in the country recently. The first initiative, which involved significant tax and regulative changes desired boosting of Islamic finance in France, was proclaimed in July 2008. Especially, these changes were associated to the admittance to listing of sukuk on a French regulated market, the tax dealing of Islamic financial transactions and, to a lesser extent, reforms of the fiducie (French trust). Under these alterations, recompense paid by sukuk issuers is, for tax purposes, handled just like the interest on a traditional bond offering and is reducible from taxable return. Besides, the compensation paid to non-resident sukuk investors is free from withholding tax in France, irrespective of whether an offering is governed by French law or the laws of another country.
The French government made certain rectifications to its laws in order to ease sukuk issuances in July 2010. The rectifications deleted double stamp duty, the payment of a capital gains tax on property and developed the regulations ruling estate agents. France saw the introduction of the first Islamic deposit scheme operated via the Islamic window of an existing conventional bank in June 2011. Following this successful start off, an Islamic home finance product, a 10-year murabahah contract, was presented. This was met with strong requirement because of the fact that home financing has been a key desire of French retail customers. Presently, there are plans to begin a similar Shari’ah-compliant deposit scheme targeted at small and medium-sized initiatives. The French tax authorities are also organizing to issue extra guidelines dealing with other Islamic finance concepts, including musharakah and mudarabah,as soon as possible.
There are presently six Shari’ah-compliant funds in France with total resources under management of USD 147.2 million, which are apart comparatively evenly between money market (47%) and equity (53%) assets.
Moreover, Islamic finance emerges to have good potential to advance further in France. The country has founded friendly trade flows with a lot of close neighbours with large Muslim populations, including Morocco, Algeria and Tunisia. A significant proportion of the French population comes from North Africa, and this has been motivating domestic requirement for Islamic finance, of course.