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ITALY
Italy: Jumping into the future of
Islamic finance
By Alberto Brugnoni
The shortcomings of conventional finance that are becoming
more evident by the day across the globe, have not spared
the ‘Bel Paese’ and sparked a nation-wide debate on the ways
and means to overcome a crises that has become almost
endemic. Though Islamic finance is still marginal in this
debate, its understanding of the nature of money, its dislike
of credit brokerage based on interest rate and its wealth
redistribution and risk-sharing approach, coupled with its
financing of only tangible transactions, have attracted the
attention of enlighted bankers, the fair trade and ethical
finance organizations, and the unions.
Besides, its exclusive dealing with those sectors of the economy
that can actively contribute to a sound individual and societal
development and its inclusiveness of all faiths and races,
have made it a reasonable proposition to the church. Strategic
perspectives and macroeconomic data as well, support the
use of Islamic modes of financing. In the capital market arena,
because Italy (in 2011, the 8 th largest economy in the world)
is a key trading partners with the MENASA region, and in the
retail banking sector, because she hosts 1.7 million Muslims with
estimated annual savings of US$6.5 billion (Deloitte and Pew
Research Center).
2012: A review
This encouraging and friendly environment is well epitomized
by the topics discussed at three acclaimed events. In March,
Islamic Relief-Italy hosted in Milan a conference themed
“Islamic Finance: Opportunities for an Inclusive Development”
attended, amongst others, by the top-management of the
largest Italian ethical bank and the largest microfinance
institution. The conference highlighted how Islamic finance may
provide solutions complementary to those advanced by social
and ethical finance.
In May, a conference on “Islamic Finance and Business Ethics
in the Social Doctrine of the Church” was held in Rome with
the attendance of the managing director of the central bank of
the Vatican. It meant to offer an opportunity for reflection on the
common principles of financial ethics shared by diverse religions
and cultures. In July, the annual summer school organized by
‘Università di Tor Vergata’ convened in Rome to discuss “Islamic
finance and pluralism: Managing diversity as an opportunity for
growth”.
On the domestic front, it is worth mentioning that new leasing
products for home financing have been introduced by the law
n. 220/2010. These products, though not specifically addressing
the Muslim communities’ requirements, bypass the well-known
double taxation issue thus allowing in practice Islamic financing.
This development has prompted Deloitte-Italy to author a report
on “Shariah compliant home financing in Italy” where it highlights
the business opportunity for a Gulf-based bank willing to start
a retail operation in Italy and eager to tap the hefty savings of
Muslim domestic communities. The housing market potential
for Muslims is estimated at US$123 billion. ‘Halalitalia’ has
emerged as a key player in the halal products (food, cosmetics
and pharmaceuticals) market worth an annual US$5 billion. Italy
is located at the centre of three key markets (EU, Balkans and
MENA) with a pool of 800 million potential consumers.
The interest in Islamic finance and economics continues
unabated in the academia as well. The studies often underline
the similarities between Islamic finance tools and instruments
dating back to Middle-Age banking institutions (Biasi, Università
Cattolica, Milan 2012) as well as the growing gap between
principles and praxis. The launching of “Alim-The Shariah
Scholars’ Journal”, a quarterly publication that provide a forum
for Shariah scholars, Islamic bankers and Islamic lawyers, bears
testimony to the widening scope of Islamic topics.
2013: A preview
An ice-breaking project that seeks a new role for Islamic finance,
dubbed “Rethinking Communication between Our Two Worlds”,
will see the light during 2013. Focusing on the increasing cultural
and financial bearing of Islamic finance in Muslim markets, this
initiative will use Islamic finance as a communication tool and
help Italian SMEs that are world-leaders in their area of business,
such as design, fashion, mechanics and arts, to better position
their brands and widen their scope of action.
Finally, the increasing weight, in numbers but also culturally and
socially, of the Muslim minority now in its third generation shall
help to accelerate the process of demystifying Islamic finance
consulting www.IslamicFinanceConsulting.com
www.IslamicFinanceEvents.com
across large layers of Italian society.
www.IslamicFinanceNews.com
www.IslamicFinanceTraining.com
www.MIFforum.com
www.MIFmonthly.com
www.MIFtraining.com
www.REDmoneyBooks.com
Alberto Brugnoni is managing director of ASSAIF. He can be
contacted at alberto.brugnoni@assaif.org.
On the practical side, the use of Shariah compliant structures
to source funding for the investments of Italian companies in
the Muslim regions has become quite common and several
investment banks are reasonably well-equipped to deal with
the capital market requirements of their clients. Some top-tier
commercial banks are also expanding or making acquisitions in
the Mediterranean region taking advantage of the opportunities
provided by the Arab Spring. Though these activities are
conventional in nature, it is only question of time to see the
appearance of windows that will gather under the same roof
scattered with Islamic activities. And this, in turn, could be the
harbinger of a fully-fledged Islamic bank.
February 2013 29