Germany was the first country to tap the Islamic finance market among Western Countries when the federal state of Saxony-Anhalt issued the country’s first Islamic bond (sukuk) in 2004. It drew quite strong attention and requirement and was fully subscribed, with 60 % of the issue going to financiers in Bahrain and the UAE and the remaining 40 % to financiers in Europe, especially, those of in France and Germany. The €100 million ijarah sukuk (Islamic sale-and-leaseback debt instrument) was fully regained in 2009.
Germany’s Federal Financial Supervisory Authority (BaFin) undertook a demand from a foreign foundation to act banking operations within the country according to Islamic principles in 2009. However, without a full banking licence, the range of offerings stayed restricted. A follow-up conference on Islamic finance was held by BaFin in May 2012, which was specially focused on Shari’ah-compliant finance market products (Islamic funds, sukuk and asset-backed securities).
The German market has also experienced the offering of a new Shari’ah-compliant investment product which is filed to the WestLB Islamic Deutschland Index. This is composed of shares in ten German firms whose trade activities are guided in line with the Shari’ah.
German financial institutions also actively contributed to the Islamic finance industry by means of their subsidiaries in London, Dubai and Kuala Lumpur. These institutions could play a very important role in drawing Shari’ah-compliant funds to Germany through their founded networks and expertness. The expectations for the further development of Islamic finance in Germany are quite stable. Firstly, Germany is the gratest economy in Europe and it characterizes the largest Muslim population (4.1 million people, while 3.5 million in France and 2.9 million in the UK). Secondly, German exporters could use institutions in introducing Islamic financial products as alternative sources of funding and therefore further boost their funding profiles. Thirdly, Islamic trade finance products introduce the potential to reinforce trade bonds with countries such as Turkey; a country which is an dynamic trading partner of Germany and that has a budding Islamic finance industry.