Luxembourg – a prime location for an Islamic Finance hub in Europe

Islamic Finance Challenges discussed in Luxembourg Available at: http://www.pwc.com/lu/en/press-releases/2011/islamic-financial-hub.jhtml

On 11 May 2011, Luxembourg for Finance kicked off the 8th Islamic Financial Services Board Summit with a Luxembourg Country Showcase. This showcase, which was sponsored by PwC Luxembourg and FWU Global Takaful Solutions Dubai, gathered over 150 participants from various countries around the world. The objective of this event was to highlight the benefits of Luxembourg as a European hub for Islamic Finance, and to present the experiences gained in Luxembourg to date.

The showcase began with opening remarks from M. Yves Merch, Governor of the Banque Centrale de Luxembourg (BCL). M. Mersch reminded that a close relationship between the private and public sectors was essential to the development and growth of the Islamic Finance industry in Europe, and that with BCL being an active member of IFSB he believed this was a clear advantage for Luxembourg.

Serene Shtayyeh, PwC Luxembourg partner and head of the Middle East and Islamic Finance group at PwC Luxembourg, gave an overview of the Islamic Finance industry in Luxembourg. She summarised the accomplishments the country has made so far which include “the domiciliation of over 40 shariah compliant funds, more than any other European country, and the listing of 16 sukuk on the stock exchange, second in Europe only to the UK”, said Serene Shtayyeh. In 2010, the Luxembourg tax authority issued two circulars addressing the tax treatment of certain Islamic products and the Central Bank of Luxembourg became a member of both the Islamic Financial Services Board and the International Islamic Liquidity Management Corporation.

Serene Shtayyeh also emphasised the benefits of Luxembourg as an Islamic Hub. “Luxembourg has a clear leading position in terms of fund domiciliation with $2.2 trillion in net assets as of November 2010, representing 28% of the European market, and a dominant cross border distribution position with 43 of the top 50 investment management groups”. She also highlighted the attractiveness of listing sukuk on the low cost Luxembourg Stock Exchange, and its large double tax treaty network.

Her presentation was followed by a series of panel discussions on sukuk listings and securitisation, moderated by Hubert Grignon Dumoulin, Head of Securities and Issuers, Luxembourg Stock Exchange; investment management and real estate, moderated by Germain Birgen, Global Head of HSBC Amanah Securities; and Takaful represented by Sohail Jaffer, Deputy CEO, FWU Global Takaful Solutions Dubai and Mohammed Khan, PwC UK partner. Each panel acknowledged the accomplishments Luxembourg has made in the area, and provided first-hand experience from various Luxembourg clients.

“I believe that Luxembourg has the first mover advantage in Islamic Finance in Continental Europe and as a leading cross border provider of financial services including Shariah compliant and Socially Responsible Investments(SRI), it offers an attractive gateway for Financial Institutions in Europe, Middle East and Asia which are interested in expanding their business in this fast growing sector” explains Sohail Jaffer.

The Islamic finance industry did not escape the effects of the global financial crisis, but the overall consensus is that it weathered the storm well and is on its way to, not only a full recovery, but continued growth. 2011 GDP projections for many of the countries within the Middle East region is around 5%, with expectations for countries like Qatar in the double digits. Recent turmoil in the Middle East will certainly impact the speed of growth, but many in the market are excited about the potential for the Islamic finance industry, which was evidenced by the tremendous participation at the conference.

Institutions globally are seeing the possibilities Islamic Finance has to offer and are expanding their offerings in to this area. Today sources predict the Islamic Finance industry is close to $1 trillion, and while Malaysia and the Middle East are certainly the natural destinations for Islamic investments, Islamic Finance has long since crossed borders and is now expanding in Europe, Africa, and other Asian countries.

The main summit, which was organised by the Islamic Financial Services Board, and is being held on 12-13 May, addresses the international developments in the financial regulatory landscape and what they hold for the Islamic Financial services industry. The summit brings together the Central Bank Governors and deputy Governors of a large number of Islamic countries, together with Shariah scholars and Islamic finance experts from the private sector in Europe the Middle East and Asia.

Best Regards
ZULKIFLI HASAN

Luxembourg