Abstract
The purpose of this article is to identify major challenges and opportunities for Islamic retail banking (IRB) in the European context. We present insights gained from the comparison of two European markets for IRB: the mature British and the relatively undeveloped German market. Based on this information, we propose a framework of four major attributes of a nation's socio-economic environment that determine to a large degree the evolution of a domestic market for IRB in Europe: demand conditions, supply conditions, regulatory conditions and societal conditions. We review each of these attributes, demonstrate how they can either be an opportunity or a challenge for IRB, and develop a number of suggestions for European countries and financial institutions seeking to participate in the growing market of IRB.
Similar content being viewed by others
REFERENCES AND NOTES
El Qorchi, M. (2005) Islamic finance gears up. Finance and Development: A Quarterly Magazine of the IMF 42, December 2005, http://www.imf.org/external/pubs/ft/fandd/2005/12/qorchi.htm, accessed 21 March 2010.
Pudelko, M. and Bhargava, N. (2005) The influence of Islam on the economic development of Muslim countries. Economy, Business and Finance 20: 16–28.
Wilson, R. (2005) The growth of Islamic banking and product development among Islamic retail banks. In: S. Jaffer (ed.) Islamic Retail Banking and Finance: Global Challenges and Opportunities. London: Euromoney Books, pp. 18–28.
Böhmler, R. (2007) Speech to 2nd Islamic Financial Services Forum: The European challenge. Frankfurt am Main, 5 December, http://www.bundesbank.de/download/presse/reden/2007/20071205_boehmler.pdf, accessed 25 March 2010.
Kettani, H. (2009) Muslim Population in Europe, Proceedings of the International Conference on Social Sciences and Humanities; 10–12 October 2009, Singapore.
Cooperation Council for the Arab States of the Gulf.
Baba, R. (2007) Islamic financial centres. In: M.K. Hassan and M.K. Lewis (eds.) Handbook of Islamic Banking. Cheltenham, UK: Edward Elgar Publishing Limited, pp. 384–400.
Karbhari, Y., Naser, K. and Shahin, Z. (2004) Problems and challenges facing the Islamic banking system in the West: The case of the UK. Thunderbird International Business Review 46: 521–543.
Gerrard, P. and Cunningham, J.B. (1997) Islamic banking: A study in Singapore. International Journal of Bank Marketing 15 (6): 204–216.
McKenzie, D. (2010) Islamic Finance 2010. London, UK: International Financial Services London, Islamic Finance Working Group.
Schoon, N. (2009) Islamic finance in continental Europe. Islamic Finance News, 6 March: 14–15.
Bi, F. and Atta, A. (2009) Overview of the current state of Islamic finance in Europe. Islamic Finance News Guide 4: 77–79.
Valente, C. (2010) France risks Shari’ah credentials over sukuk delay. Reuters, 17 February, http://www.reuters.com/article/idUSTRE61G2Q920100217, accessed 25 February 2010.
Verhoef, B., Azahaf, S. and Bijkerk, W. (2008) Islamic Finance and Supervision: An Exploratory Analysis. Amsterdam: De Nederlandsche Bank.
García-Herrero, A., Moreno, C. and Solé, J. (2008) Finanzas islámicas: Desarollo reciente y opportunidades. Revista de Estabilidad Financiera – Banco de España 15: 120–130.
García, E. (2009) La banca islámica crece en España al calor de la crisis. WebIslam, 17 November, http://www.webislam.com/?idt=14475, accessed 10 February 2010.
Rivlin, P. (2008) The development of Islamic banking. Orient 3: 4–11.
Dörries, B. (2009) Erste islamische Bank: Mit dem Segen Allahs im Ländle. Süddeutsche Zeitung, 19 December, http://www.sueddeutsche.de/politik/793/498092/text, accessed 20 March 2010.
Stocker, F. and Zacher, S. (2009) Regulierungsbehörde will islamkonformen Banken den Weg nach Deutschland ebnen. Die Welt, 25 August: 13.
Wackerbeck, P. (2006) Islamische Bankprodukte in Europa: Zwischen Ethno-Marketing und ethischem Investment. Die bank 6: 42–45.
Porter, M.E. (1990) The Competitive Advantage of Nations. New York, NY: Free Press.
Metawa, S. and Almossavi, M. (1998) Banking behaviour of Islamic bank customers: Perspectives and implications. International Journal of Bank Marketing 16 (7): 299–313.
Naser, K., Jamal, A. and Al-Khatib, K. (1999) Islamic banking: A study of customer satisfaction and preference in Jordan. International Journal of Bank Marketing 17 (3): 135–150.
Oakley, D. (2008) Islamic banking: Shari’ah-compliant institutions buck trend. Financial Times, 24 November, http://us.ft.com/ftgateway/superpage.ft?news_id=fto112320082024063877, accessed 23 March 2010.
Michaels, A. (2009) Muslim Europe: The demographic time bomb transforming our continent. Telegraph, 8 August, http://www.telegraph.co.uk/news/worldnews/europe/5994047/Muslim-Europe-the-demographic-time-bomb-transforming-our-continent.html, accessed 10 February 2010.
Pauly, C. (2009) Shari’ah banking comes to Germany. Der Spiegel, 22 October, http://www.spiegel.de/international/germany/0,1518,656448,00.html, accessed 24 March 2010.
Wilson, R. (1999) Challenges and opportunities for Islamic banking and financing in the West: The United Kingdom experience. Thunderbird International Business Review 41: 421–444.
Demgensky, S. and Knofler, L. (2010) Ready to grow: Potential of the German market for Islamic finance. Business Islamica Magazine, 15 February, http://islamicame.com/article.asp?cntnt=430, accessed 25 March 2010.
Alexander, P. (2010) Scholars and scale. The Banker, 3 March, http://www.thebanker.com/news/fullstory.php/aid/7123/Scholars_and_scale.html?current_page=1, accessed 21 March 2010.
Valente, C. (2009) French financial plans 1 billion euro sukuk. Reuters, 16 April, http://www.reuters.com/article/idUSTRE53F2XA20090416, accessed 25 February 2010.
Zick, A. and Küpper, B. (2009) Attitudes Towards the Islam and Muslims in Europe: Selected Results of the Study ‘Group-Focused Enmity in Europe. GFE-Europe Research Report.
Wilson, R. (2007) Islamic Finance in Europe. Florence, Italy: European University Institute. RSCAS Policy Papers 07/02.
Briault, C. (2007) London: Centre of Islamic finance? Speech to Industry Forum, London, 17 October, http://www.fsa.gov.uk/pages/Library/Communication/Speeches/2007/1018_cb.shtml, accessed 25 March 2010.
Ainley, M., Mashayekhi, A., Hicks, R., Rahman, A. and Ravalia, A. (2007) Islamic finance in the UK: Regulation and challenges. Financial Services Authority, November 2007, http://www.fsa.gov.uk/pubs/other/islamic_finance.pdf, accessed 25 March 2010.
Savage, T.M. (2004) Europe and Islam: Crescent waxing, cultures clashing. The Washington Quarterly 27: 25–50.
Amin, M. (2006) UK taxation of Islamic finance – Where are they now? PricewaterhouseCoopers Islamic finance blog, 20 November, http://pwc.blogs.com/islamicfinance/2006/11/uk-taxation-o-1.html, accessed 21 March 2010.
Naser, K. and Moutinho, L. (1997) Strategic marketing management: The case of Islamic banks. International Journal of Bank Marketing 15 (6): 187–203.
Dixon, R. (1992) Islamic banking. International Journal of Bank Marketing 10 (6): 32–37.
Haron, S., Ahmad, N. and Planisek, S. (1994) Bank patronage factors of Muslim and non-Muslim customers. International Journal of Bank Marketing 12 (1): 32–40.
Rammal, H. and Zurbruegg, R. (2007) Awareness of Islamic banking products among Muslims: The case of Australia. Journal of Financial Services Marketing 12 (1): 65–74.
Acknowledgements
We would like to thank Ms Maike Bader, Tübingen University, for her diligent research assistance.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Volk, S., Pudelko, M. Challenges and opportunities for Islamic retail banking in the European context: Lessons to be learnt from a British–German comparison. J Financ Serv Mark 15, 191–202 (2010). https://doi.org/10.1057/fsm.2010.16
Received:
Revised:
Published:
Issue Date:
DOI: https://doi.org/10.1057/fsm.2010.16