Islamic finance is sparking a heated debate in France, a strictly secular European heavyweight, though economists contend it would be in the country’s interest to tap into the booming global industry.
"We must not allow principles of Shari`ah law, or the ethics of the Qur`an to be introduced into French law," Socialist MP Henri Emmanuelli told Agence France Presse (AFP) on Sunday, September 27.
The parliament approved this month a number of adjustments to the banking laws to allow sukuk [Islamic bonds] to be issued for the first time.
The Qatar Islamic Bank has, meanwhile, applied for license to operate in France as the first Islamic bank.
The government is leading a drive to attract billions in investment from Muslim entrepreneurs, hoping to unseat London as the European capital of Islamic finance by offering products that comply with Shari’ah.
Minister Christine Lagarde and Central Bank Governor Christian Noyer are to address a major conference in Paris this week that could yield some announcements on promoting Islamic finance in the French economy.
But the drive to open up to Islamic finance is upsetting some politicians.
Emmanuelli's Socialist Party has tried to block the law amendments but failed and is now challenging them before the Constitutional Council.
The far-right National Front has also denounced Islamic finance as a "community-based peril" resulting from immigration.
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.
Important
Elyes Jouini, an Economics Professor, blamed opposition to the government’s moves to "fear of the unknown."
"The term Islamic is confused with Islamist, the term Shari'ah raises fears because some think of women forced to cover themselves, the word fatwa raises fears because some think of Salman Rushdie, but a fatwa is nothing more than a decree," he told AFP.
"Islamic finance draws from the ethical principles of Muslim law but it obviously obeys Republican laws. It is not outside the boundaries of legality or civil society."
Economists contend that money raised through Islamic finance could help spur France's nascent recovery with tools that are seen as financially sounder than the high-risk derivatives that led to the 2008 global meltdown.
"There are extremely important financial reserves in Gulf countries and southeast Asia and these countries are ready to invest anywhere but they have specific rules in terms of ethics and in terms of the choice of investment," notes Jouini.
"If France wants to attract this capital to its economy, it must offer the possibility for these investors to do so according to the rules of Islamic finance."
Islamic finance is one of the fastest growing sectors in the global financial industry.
In defiance of the credit crunch, the global Islamic finance market has grown about 15 percent in each of the past three years, and is now worth about $700 billion worldwide.
Its assets are predicted to grow to $1 trillion by 2013.
Renowned world banks like Citigroup, HSBC and Deutsche Bank, as well as financial capitals like London, Tokyo and Hong Kong, are all going into the Islamic banking business.
In a report presented to the government last year, Jouini estimated France could tap into 120 billion euros in capital from Islamic finance if it made some adjustments to its tax and banking laws.
He noted seven billion euros of those would be raised domestically from French Muslims, estimated to number seven millions, who are yearning for financial deals in line with their faith.
