Interview of Aida Kellal, Lawyer, Cuatrecasas, Gonçalves Pereira, Member of ISFIN
Islamic Shari’ah Investment in Spain – An introduction
What would be the benefits of introducing Islamic Finance to Spain.
Given the tremendous increase of the weight of Islamic finance over the past decade, and its latest development within and outside Muslim countries, including the UK, France and China; it does represent an outstanding geopolitical opportunity for Spain. Islamic Finance could be one of the answers to Spains’s needs in capital. Our country needs to invest in its future, and must be ready to welcome foreign investors from the Muslim world who wish to contribute to the development of our projects.
From another point of view, it will also reinforce the position of Spain as a financial marketplace and develop its visibility worldwide. A dynamic financial platform enables our firms, small and big, to grow and develop. This is all the more accurate as the current international crisis forces the actors in the financial sector to narrow the array of their investments, concentrating on a few global marketplaces. It is therefore our prime interest that Spain could compete with its neighboring financial markets.
What are your country main challenges to enable proper development of Islamic finance.
We have to concede that, unlike other neighboring European countries with similar civil law tradition and system, Spain is still far behind when it come to the introduction of Islamic Finance. Although we are starting to see some genuine interest from financial institutions and some institutional bodies, we have yet to witness a clear political or governmental scheme or plan to that respect.
The problematic lies in a wide spread lack of understanding when it comes to what is Islamic Finance, perception of which is often and commonly reduced to its religious origin, whereas it could be assertively described as a competitive and ethical system based on some simple principles, whereby Shariah compliant products are backed on the real economy, retribution related to cash flows, and share of losses between the loaner and the borrower. Which principles, in a time of financial crisis, can only be welcomed.
The other main challenge is being on the regulatory side. Indeed, due to their particular structuring, Islamic Finance product, are often the victim of additional fiscal costs, mainly being VAT, capital gains, registration and transfer fees, which could significantly increase the cost of financing, and therefore be of no interest for investors as well as customers and end users.
How do you see the development of investments emerging from Islamic countries in Spain.
Lately we have witnessed an increasing interest from Islamic finance institutions and banks for Spain. As a consequence of the financial crisis, the shortage of liquidities and tightening of credits facilities, many governmental as well as private projects are been either delayed or cancelled. However, the fundamentals of the Spanish economy remain strong, a diversified economy, a strong consumption market, endless opportunities from tourism to renewable energy, coupled with a Muslim community of 1.5 million, constitute a pool of attractions for Islamic Finance based investments, loan instruments such as Sukuk or retail banking. What is hence at stake for Spain is its capacity to introduce the adequate legislation and thus attract those investments to contribute to our country’s development.
Cuatrecasas, Gonçalves Pereira
T. +34 932905516