Islamic Finance in Germany Factsheet

Market Opportunities
With a population of 4 million Muslims in Germany, holding an estimated wealth of 25 billion , Germany potentially is a big market for Islamic Finance. Not only are net incomes of Muslim households estimated to rise further in the future, Muslims also have a remarkable savings rate of nearly double the national average (18 % compared to 10%). The majority of Muslims in Germany are comparatively young (three out of four between 14 and 49 years old). Besides, 74 % of Muslims in Germany consider themselves to be religious making them a potential target group for Islamic Finance products. According to a 2010 survey, 72 % of Muslims living in Germany are interested in Islamic Finance products. If offered by a German bank, 60 % of the respondents consider an investment. An outstanding 94 % of them declared interest if the services were offered by an Islamic bank. The strongest interest is shown in mortgages (62%), insurance (43%) and funds (42%). A business consultancy recently has estimated the German market potential for Islamic Banking products to amount to 1.2 billion Euro. Despite the financial crises, growth rates in the international market have been at 10% during the last two years.

Muslim population in Germany

4 million (of around 82 mil-

lion)
Whereof Sunnite: 2.64 mil-

lion: Shiite: 225.000

Among them: 2.8 million of

Turkish, 75.000 of Iraqi, 60.000 of Moroccan, 40.000 of Lebanese origin

Approx. 1 million have Ger-

man citizenship
77 % between 14 and 49

years old
83 % consider themselves to

be religious.

Financial & Economic Facts

Estimated wealth of Muslims in Germany: approx. 18-25 billion
Turkish entrepreneurs generated

Market Situation
Despite these made-to-measure market preconditions, there exist no target-group affiliate product-portfolios. Although there have been successful models in the past, such as the issuance of the first sukuk by the German state of Saxony-Anhalt, in 2004, Islamic Finance is still underrepresented in Germany. Only recently a few German banks have started to offer Islamic Banking

50 billion in 2008 (increasing tendency)

Saving capacity: approx. 2.2 billion

/ insurance prizes: approx. 1 billion

High saving rate: 18 % of net in-

come (compared to 10% among Germans)

Significant decrease of money

transfers to foreign countries (currently a mere 5%)

products for institutional investors. Among them are the DWS Noor Islamic Funds by Deutsche Bank Group, Allianz Global Investors Islamic Fund and the Meridio Islamic Fund. There are no products targeting the German retail market. In this respect the German situation is different from e.g. the situation in the UK, where the Islamic Bank of Britain and other banks have been offering Islamic banking products for British Muslims for several years. It is worth mentioning that Deutsche Bank has set up a product line specifically targeting ethnic Turks (Bankamiz) that operates very successfully. Bankamiz, however, serves an ethnic market (in the Turkish language etc.); the Bankamiz products are not Sharia compliant.

Regulatory Situation
There are no regulatory provisions which would prohibit or intentionally prevent Islamic financing products. This means that offering Islamic financial products in the German market is possible. On the other hand, until recently the German Banking regulator, Federal Financial Services Authority (BaFin), was not particularly aware of Islamic finance (with the result that there are no special rules facilitating Islamic finance either). In 2009, however, BaFin organized a conference on Islamic Banking, welcoming Islamic Banks to enter the German market. BaFin president Jochen Sanio explicitly stated that there are no major legal obstacles for granting licenses to Islamic Banks and their products in Germany. Following this initiative, Kuveyt Turk Participation Bank, majority-owned by the Kuwait Finance House, was the first Islamic Bank to open an office in Mannheim, Germany in 2010, which is to start operating in 2011.

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Sources
Kilian Blz, Islamic Finance for European Muslims: The Diversity Management of Shari'ah-Compliant Transactions, Chicago Journal of International Law 2006-2007, 551 ff. Institute for Islamic Banking and Finance, http://www.ifibaf.com/index.php/IFIBAF-Islamic-FinanceIslamic-Banking-Marktpotenzial-Islamic-Banking-Europa

BaFin Quarterly Journal, http://www.bafin.de/nn_992948/SharedDocs/Downloads/EN/Service/Mitteilungsblaetter/BaFinQuarterl y/bq0904,templateId=raw,property=publicationFile.pdf/bq0904.pdf Booz & Company, http://www.booz.com/de/home/Presse/Pressemitteilungen/pressemitteilungdetail/41864791 Islamic Finance Expert, http://ifinanceexpert.wordpress.com/2010/05/05/islamic-bank-enters-germany/