Islamic Finance in Europe
ECB Occasional Paper No. 146
See all articles by Filippo di Mauro
Filippo di Mauro
Pierluigi Caristi
Banque Centrale du Luxembourg
Stéphane Couderc
Angela Di Maria
Lauren Ho
Baljeet Kaur Grewal
Kuwait Finance House Research
Sergio Masciantonio
European Union - European Commission
Steven Ongena
NTNU Business School; Centre for Economic Policy Research (CEPR); Swiss Finance Institute; KU Leuven; University of Zurich - Department of Banking and Finance
Sajjad Zaheer
State Bank of Pakistan - Monetary Policy Department
Date Written: April 15, 2013
Islamic finance is based on ethical principles in line with Islamic religious law. Despite its low share of the global financial market, Islamic finance has been one of this sector's fastest growing components over the last decades and has gained further momentum in the wake of the financial crisis. The paper examines the development of and possible prospects for Islamic finance, with a special focus on Europe. It compares Islamic and conventional finance, particularly as concerns risks associated with the operations of respective institutions, as well as corporate governance. The paper also analyses empirical evidence comparing Islamic and conventional financial institutions with regard to their: (i) efficiency and profitability; and (ii) stability and resilience. Finally, the paper considers the conduct of monetary policy in an Islamic banking context. This is not uncomplicated given the fact that interest rates – normally a cornerstone of monetary policy – are prohibited under Islamic finance. Liquidity management issues are thus discussed here, with particular reference to the euro area.
Keywords: Islamic finance, central bank monetary policy and regulations, globalisation, financial institutions, financing policy, corporate governance and culture, social responsibility
JEL Classification: E52, E58, F6, F65, G21, G22, G28, G3, G32, M14
di Mauro, Filippo and Caristi, Pierluigi and Couderc, Stéphane and Di Maria, Angela and Ho, Lauren and Kaur Grewal, Baljeet and Masciantonio, Sergio and Ongena, Steven R. G. and Zaheer, Sajjad, Islamic Finance in Europe (April 15, 2013). ECB Occasional Paper No. 146, Available at SSRN: https://ssrn.com/abstract=2251204 or http://dx.doi.org/10.2139/ssrn.2251204
Filippo Di Mauro (Contact Author)
European Central Bank (ECB) ( email )
Banque Centrale du Luxembourg ( email )
2, boulevard Royal
Luxembourg, L-2983
Bank of Italy ( email )
Rome, 00184
Kuwait Finance House Research ( email )
Baitak Tower, Floor 2, Safat Square
Ahmed Al Jaber Street
European Union - European Commission ( email )
Brussels, B-1049
Steven R. G. Ongena
NTNU Business School ( email )
Centre for Economic Policy Research (CEPR)
Swiss Finance Institute
c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
KU Leuven ( email )
Oude Markt 13
Leuven, Vlaams-Brabant 3000
University of Zurich - Department of Banking and Finance ( email )
Schönberggasse 1
Zürich, 8001
State Bank of Pakistan - Monetary Policy Department ( email )
I.I. Chundrigar Road
Karachi, 74000