The Vatican in favour of Islamic Finance

The Daily Vatican newspaper, ‘L’Osservatore Romano, recently reported that Islamic banking system may help to overcome global crisis. The Vatican said banks should look at the ethical rules of Islamic finance to restore confidence amongst their clients at a time of global economic crisis. Indeed, the ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service. Western banks could use tools such as the Islamic bonds, known as sukuk, as collateral. Sukuk may be used to fund Greece's lack of liquidity and structural investments.

Profit share, gained from sukuk, may be an alternative to the interest and support investments in infrastructure area.

Islamic sukuk system is similar to bonos of capitalist system. But in the sukuk system, money is invested concrete projects and profit share is distributed to clients instead of interest earned.

Some marketing still needs to be done to convince Western banks to develop corporate and retail products. However, the culture is changing fast and in many European States, governments now have think-tanks to assess how to attract islamic investors in their market and create a shariah-friendly regulatory environment.

Islamic finance is a mix of three concepts : (1) money, (2) religion/ethics, (3) law.

In order to accompany, on the legal side, Islamic investors willing to invest in a more stable and secure economic environment like most EU countries offer, a network of Islamic finance lawyers has been created. ISFIN is the world's leading network of islamic finance lawyers. The objective is to offer to both islamic investors investing in Western countries and Western investors investing in Muslim countries, a fair knowledge of the law and technicality of Islamic finance.

The main challenges for the propagation of islamic finance outside the Muslim world are (1) the culture and (2) the legal environment. The economic context offers today a unique opportunity to bridge humanity.

Prof Laurent Marliere (*)

(*) Laurent Marliere is General Manager of ISFIN, the world's leading network of Islamic Finance Lawyers. www.isfin.net