“Islamic banking market is limited”

Banks that base their business on Islamic law, the Sharia, remain a niche phenomenon in Germany, says economist Matthias Casper from the University of Münster. The prohibitions are interpreted in different ways.

Branch of the Islamic KT Bank in Frankfurt am Main

Dhe economist and legal scholar Matthias Casper does not believe that Islamic banking will be as successful in Germany as it is in Great Britain, for example. “The market for Islamic banking is limited,” he told the Evangelical Press Service (epd) in Münster. On the one hand, there are not as many Muslims in this country as, for example, in Great Britain, on the other hand, a large proportion of the Muslims living in Germany come from secular Turkey.

The only Islamic bank in Germany has about as many customers as a small to medium-sized Volksbank, said Casper, who teaches at the University of Münster. Islamic banks only conduct business that complies with Islamic law, the Sharia. According to Casper, Islamic banking is based on three pillars: the prohibition of interest (Riba), the prohibition of all businesses with a gambling character (Maysir) and the prohibition of speculation and uncertainty (Gharar). “What exactly falls under Islam-compliant banking business is controversial,” said Casper. Islamic banking is shaped by different schools of law with different interpretations – like the whole of religion.

To ensure that Islamic banks only offer Islamic-compliant financial products, they usually followed the guidelines of two large think tanks, one more conservative from Bahrain and one more liberal from Malaysia. To this end, every Islamic bank has a kind of Sharia council made up of Islamic legal scholars, which reviews the individual products.

“Islam-compliant financial products are often more expensive because they are more cumbersome”

In particular, the prohibition of uncertainty is interpreted differently, said expert Casper. “A certain residual risk is accepted.” The interest ban is meanwhile circumvented by a kind of parallel purchase (Murabaha): For example, the bank buys a car at normal market price. Then she sells it with a previously agreed premium to the customer, who repays the price in installments.

Another financial product of Islamic banks are so-called participation accounts, said Casper. If customers want to invest money, the banks invest the money in – from an Islamic point of view – ethical companies. “Defense companies or companies that are active in the pork, alcohol or red light industries, for example, are prohibited.” The companies allow the bank to share in their profits. The bank then distributes this profit to its customers.

“These Islamic-compliant financial products are usually a bit more expensive because they are cumbersome,” said Casper. He believes that Islamic banks are unlikely to be of interest to people other than religious Muslims. For people who do not want to invest in the arms industry or high-risk investments, there are enough other offers in the area of ​​so-called ethical banking. The situation is different in Malaysia, for example, which is strongly influenced by Muslims: There are also many ethnic Chinese customers of Islamic banks.