Germany is to get its first fully operational Islamic bank on July 1. Opened by the Turkish finance group Kuveyt Turk it will provide Sharia compliant banking services.
“This new achievement will open vast areas of business and investment in Europe’s largest economies, as this is the first bank to obtain a full function license to take deposits and offer credit finance facilities in Germany as per Islamic rules and regulations,” Kuwait Finance House said in a statement on Thursday.
The wholly-owned subsidiary of the Turkish lender will be called KT Bank AG with its headquarters based in Frankfurt and branches in Cologne and Berlin. It will serve Germany’s 4 million Muslims but also plans to expand its services throughout Europe.
“Our market research has shown, that 21 percent of Muslims in this country would see an Islamic bank as their natural household bank,” Kuveyt Turk’s managing director Kemal Ozan was cited as saying by Deutsche Welle.
The bank will operate under the principles of Islamic Sharia law, under which it can’t participate in speculative ventures or investments, can’t charge interest on loans, based on the Islamic teaching that a Muslim may not benefit from lending money or receiving money from someone else. Islamic banks, however, may still purchase assets and resell them for a profit. Sharia law also forbids investment in industries like gambling, alcohol or pornography. Islamic banks tend to stay away from companies with debts amounting to more than 30 percent of their value.
Turkey’s Kuveyt Turk investment fund, which operates under the principles of Islamic sharia law, plans to open its first German branch in October.
The first branch in Germany will be opened in Frankfurt with the assistance of Ernst & Young and the Norton Rose law firm. More branches are due to open in the near future in other German cities, particularly Berlin, the Financial Times Deutschland reported.
Sharia law bans a fixed or floating payment or acceptance of specific interest or fees on loans. The bank also buys houses and then resells it to clients for a higher price. Such banks already operate in Britain, where the Muslim community nears 3 million people.
Germany has one of the largest Muslim population in Western Europe. About 3.5 million Muslims live in Germany with 70% of them originally from Turkey.
Islamic banking is growing faster in Britain and France than in many Islamic countries in the Middle East and Asia. Britain remains Europe’s main Islamic finance hub with its five Islamic banks. Luxembourg is also planning to launch an Islamic lender of its own. The Islamic Bank of Britain reported a 55 percent rise in applications for its savings accounts by non-Muslims in 2014 after the Barclays rate-fixing scandal.
Britain became the first non-Muslim country to begin trading in sukuks that are the Islamic equivalent of bonds. Hong Kong, Luxembourg and South Africa have also issued sukuks.
In 2010 Kuveyt Turk, the largest Islamic bank in Turkey, which is 62 percent owned by Kuwait Finance House, set up a branch in the southwestern German city Mannheim, but was not fully operational. In 2012 it applied for a full banking license, and plans invest $48.7 million in the planned German unit.
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