Turkish finance group Kuveyt Turk said on Sunday that it is preparing to begin operations in Germany in July, making it the first Shariah-compliant retail banking service in the European country. Kuveyt Turk’s announcement puts Germany in a growing list of European countries that have opened their doors to Shariah-compliant finance.
The company plans to launch a subsidiary called KT Bank AG, based out of Frankfurt, which would cater to Germany’s Islamic community, the second-largest in Europe, Reuters reported. Kuwait Finance House owns a 62 percent stake in the bank. Kuveyt Turk said it plans an initial investment of 45 million euros ($48.7 million) in the German branch.
"Our market research has shown, that 21 percent of Muslims in this country would see an Islamic bank as their natural household bank," Kemal Ozan, the bank’s managing director, said in a report, according to Deutsche Welle. Kuveyt Turk reportedly already operates a branch in the city of Mannheim, but it is not yet fully operational.
The bank operates under the guidelines of Islamic finance, which means that it cannot participate in speculative ventures or investments, or other financial instruments that are deemed un-Islamic. It also forbids the charging of interest on loans, or financial investments in industries like gambling, alcohol or pornography.
A poll by KPMG found that 95 percent of Swedish Muslims would switch to Islamic banking if the option existed, and 83 percent said they would be willing to pay higher premiums for Shariah-compliant services.
Ireland has also emerged in recent years as a hub for Islamic finance in Europe since launching two Shariah-compliant investment companies in 2003. Irish Prime Minister Enda Kenny has said that he aims to make the country a “center of excellence for Islamic financial services,” and the country has adapted its tax and financial laws to allow Sharia-compliant finance.
The global Islamic finance market is estimated to be worth about $2 trillion. However, retail Islamic banking services have reportedly been slow to gain traction in European markets due to additional regulations.