The Grand Duchy has a long history of working with the Islamic sector, but is not content to rest on its laurels
December 17, 2014: The government of Luxembourg is ready to help Islamic finance move into the mainstream financial markets with a raft of initiatives.
The Grand Duchy has a long history of working with the Islamic sector, but is not content to rest on its laurels and is looking to the future, Eleanor de Rosmorduc, Senior Adviser, Market Intelligence, Luxembourg for Finance told International Finance Magazine in an interview at the 2014 EU Islamic Finance and Banking Summit in London.
“In the beginning, it was Islamic business that came to Luxembourg, but Luxembourg has always been very open to new markets and new ideas. We were the first European market outside London to authorise an Islamic institution,” said de Rosmorduc.
It was back in 1978 that Luxembourg licenced the first Islamic financial institution in Europe. In 1983, the first sharia compliant insurance company in Europe was established in Luxembourg and, in 2002, Luxembourg was the first European stock exchange to list a sukuk. The country has also joined the International Islamic Liquidity Management Corporation.
“Our central bank wanted to prepare the way and become familiar with liquidity management for this sector. The investment funds came to us because we are a well-known centre for investment funds,” adds de Rosmorduc.
This year saw the issuance of Luxembourg’s first sovereign sukuk. It was a €200mn bond and it was two-and-a-half times over-subscribed and de Rosmorduc says the bond is a start rather than an ending, with more sukuks expected from both the public and private sectors.
She said: “The government intends to continue its programme. We will be looking more to project financing, something that actually creates something, rather than just turning money around. It is a case of finding the right infrastructure project for the next one and various ideas are being kicked around.
“We want to encourage more corporate sukuks. There is demand from the banks and from investors, there is liquidity. For corporates, it gives them access to a completely new pool of money.”
Also this year, Luxembourg became host to the first Islamic bank in the Eurozone. The venture, named Eurisbank, was launched with an initial capital of €60 million. The bank offers retail, corporate and private banking services and is aiming to open branches in Paris in France, Brussels in Belgium, the Netherlands and Frankfurt in Germany.
“The new Islamic bank in Luxembourg is a huge step forward for us. We will continue to host investment funds. That is an area where we have the edge on other markets and an area where we continue to be very innovative,” says de Rosmorduc.
In a presentation to the conference, Marco Lichtfous, Partner, Deloitte explained why the time is right for Islamic finance to flourish in Europe generally and Luxembourg specifically.
He said: “I think in Europe the demographics are very encouraging. The legal framework in most European countries has been adjusted and they have recognised the value of this sector. There is a large market because of increase in trade between Europe and the MENA countries and that is driving demand for sharia complaint finance.
“Luxembourg has some advantages. It is stable economically and politically. It is one of the countries that still has an AAA rating. It is a predictable and stable country.”