The European Union’s largest and strongest economy, Germany, is finally edging toward facilitating Islamic finance in its jurisdiction. Germany has a Muslim population of 4.3 million, the second largest Muslim population in the EU after France with 5.5 million.
Reports from Germany stress that the country’s banking regulator, the Federal Financial Services Authority (BaFin), has issued a limited banking license to Kuveyt Turk Participation Bank, one of Turkey’s four so-called participation (Islamic) banks. Kuveyt Turk is majority-owned (62 percent) by Kuwait Finance House, one of the largest Islamic banks in the world in terms of capital and assets. The Islamic Development Bank (IDB) also has a 9 percent stake in Kuveyt Turk Participation Bank.
At the same time, Cologne-based Meridio AG has recently launched the Meridio Global Islamic Multi Asset Fund, a Luxembourg-domiciled mutual fund, which the promoters claim is the “first approved, actively managed, international, ethically compliant, balanced mutual fund under European investment laws” and is aimed at retail and institutional investors in Germany and the Euro zone countries initially, and later in the Middle East, Malaysia, Russia, India, Pakistan and East Asia. The investment pool comprises Shariah-compliant equities and sukuk.
These developments come after the first-ever Islamic finance conference held by BaFin in October 2009 in Frankfurt-an-Main, which was addressed inter alia by Jochen Sanio, president of BaFin, Muhammad Al-Jasser, governor of the Saudi Arabian Monetary Agency (SAMA) and Nik Ramlah Mahmood, managing director of the Securities Commission of Malaysia.
Kuveyt Turk is arguably the most proactive of Turkey’s four Islamic banks, which also include Turkiye Bankasi, in which Saudi Arabia’s National Commercial Bank has a majority stake; Albaraka Turk Participation Bank, which is a subsidiary of the Albaraka Banking Group, which in turn is majority owned by Saudi Arabia’s Dallah Albaraka Group, headed by Saleh Kamel; and Asya Bank.
Kuveyt Turk hitherto had a representative office in Frankfurt-am-Main in Germany, and the new authorization, albeit limited, of Kuveyt Turk Beteiligungsbank is effectively an upgrade of the representative office. Kuveyt Turk Participation Bank has hitherto marketed its profit-and-loss (PLS) sharing products to expatriate Turks working and living in Germany and the Benelux countries through representative offices. Kuveyt Turk also subsequently got permission to set up branches in Germany.
Kuveyt Turk Participation Bank also has a banking subsidiary in Bahrain and the Dubai International Financial Centre (DIFC) and plans to open further offices in selected countries, especially those with which Turkey has promising trade relations. International; rating agency, Fitch at the end of 2009 placed Kuveyt Turk Participation Bank’s long-term foreign currency rating on positive watch (RWP). Fitch also affirmed Kuveyt Turk’s long-term local currency rating at BBB-, short-term foreign currency rating at B and short-term local currency rating at F3. The ratings reflected the bank’s sound fundamentals and the strong support of its majority shareholder, Kuwait Finance House.
Kuveyt Turk net profit totaled 107 million TL in the first nine months of 2009 – up 26.7 percent from the same period in 2008. Total assets similarly increased from 4.954 million TL to 6.439 million TL in the same period for 2008 to 2009; total cash loans too increased from 4,136 million TL to 4,957 million TL, while customer deposits increased by 40.7 percent to reach 4,989 million TL for the same period.
Kuveyt Türk Beteiligungsbank got the initial go-ahead toward the end of 2009, effectively making it the first stand alone bank to operate under Islamic banking principles in Germany, and second only in the European Union after the UK’s Financial Service s Authority (FSA) authorized five banks that operate under Islamic banking principles over the last two years.
Qatar Islamic Bank is also reportedly in the process of setting up a joint venture Islamic bank in France after getting approval from the French central bank.
Germany, whose history of credit unions and mutual societies, should be the ideal fit with Islamic finance. But, apart from Deutsche Bank, Hypo Real Estate Bank, Commerzbank and insurance giant Allianz and FWU AG, another insurance company, structuring and distributing a number of ad hoc Islamic financial products such as real estate transactions, private equity deals, equity certificates, sukuk, Takaful and Retakaful in the Middle East and Asia, the German financial services sector has been conspicuous in its absence of promoting such offerings in its home market. Commerzbank, for instance, was the fund manager for Albaraka’s asset management company, Al Tawfeek’s Al-Sukoor European Equity Fund, which has since matured and closed.
KTB is set to start operations in Mannheim in early 2011 with branches in several other German cities to follow. KTB’s license allows it to collect deposits and investment funds in Germany that will be transferred to PLS accounts in depositors and investors’ names in Turkey.
As far as the Meridio Global Islamic Multi Asset Fund is concerned, it is a dual currency (US dollar and Euro) open-ended multi-asset mutual fund with an issue price of $100 or 100 euros, is targeting high end Shariah-compliant stocks in the real estate, energy, raw materials, infrastructure, pharmaceuticals, alternative energy, transportation, food or water sectors in the countries of the Euro zone, United States, Canada, Brazil, India, Southeast Asia, Australia, the GCC countries, Turkey, North Africa and Russia. The subscription period closes at the end of April 2010 and the fund will start investing in early May 2010.
The fund’s investment manager, Meridio Vermögensverwaltung AG, is an independent asset manager for private and institutional investors, and has experience of launching investments with partners in the Middle East, where it launched its latest Meridio Arab World Fund in 2007.
According to Meridio Vermögensverwaltung AG, it can draw on a universe of more than 12,000 global securities/bonds, all of which meet the strict requirements and specifications of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) rule-book for Shariah-compliant equities and sukuk.
These take into account the fundamental data, technical analysis and market psychology, upon which the fund management then decides when and with what amount it invests in the relevant securities. The Ethical Review Board (the Shariah Advisory Board) then reviews the fund at regular intervals, in order to guarantee that the equities and sukuk fund portfolio comply with Islamic investment guidelines.
source : arabnews