Credit Crunch: A Chance to Develop the Islamic Finance Market in Germany?
Nicole Guski, Partner
Norton Rose
May 2009
Nearly five years have passed since the federal state of Saxony-Anhalt in Germany issued Europe’s first Islamic bond in July 2004. This prompted market players to be quite enthusiastic about the potential of Islamic finance in the German market. Although more than three million Muslims live in Germany and corporate Germany has a good reputation in many Muslim countries, the expected boom for Islamic finance does not seem to have emerged.
The reasons for this are manifold, but unlikely due to a lack of potential. Although the majority of Muslims living in Germany have a background of migration and have a lower income compared to the Germans, their savings are usually higher. According to Booz & Company, there is a potential of €1.2 billion (US$1.5 billion) a year for Shariah-compliant finance products, which would mean an annual growth rate of 15-20%. There is definitely growing interest in such products as the increasing number of participants from Germany at Islamic finance conferences shows.
Due to globalisation, an increasing number of German banks are already involved in the Islamic finance markets outside Germany. They include Deutsche Bank, Commerzbank and Dresdner Bank. Deutsche Bank has been issuing Sukuk in cooperation with banks in Saudi Arabia since 2005. These are, however, not the only banks that are active in Islamic finance.
In 2005, for example, it was announced that Arcapita Bank mandated Bayerische Hypo-und Vereinsbank, Standard Bank and WestLB‘s London branch to arrange a US$200 million five-year multi-currency Murabahah Sukuk. Similarly, CCH Europe, the German subsidiary of CCH International, arranged a US$20 million Murabahah for Globexbank in Moscow in 2006. Islamic trade and export finance structures are also regularly used by German banks.
