Islamic Financial Institutions in the European Economy

By Nikonova, Tatiana, V; Yusupova, Liliya M. et al. | Journal of Economics and Economic Education Research, January 1, 2016 | Go to article overview

Islamic Financial Institutions in the European Economy


Nikonova, Tatiana, V, Yusupova, Liliya M., Nugaev, Fatich Sh, Journal of Economics and Economic Education Research


INTRODUCTION

In the basis of scientific interest at comparison of European and Moslem economic system often lies the thesis regarding retention of economic development of many Islamic countries and advancing of peculiarities of religious world view as the prime cause of such retention. However, as result of non-satisfaction by outputs of capitalist and socialist economic systems evolution, at the end of XX century the interest to alternative Islamic economic model gradually grows. Especially that traditional European investment practices, often driven by uncontrolled rush to over-profits, were the main cause of contemporary global financial crises.

In practice, Islamic economic model confirms its vitality in market conditions of economic. However, at this should be taken into account taht this model require response actions from market institutes in order to guarantee that personal interest and profit motives would not provoke a start-up of socially destructive forces and would not violate standards of justice and fair play.

In its essence, the Islamic economic model is a peculiar system of economic built on unshakable standards and principles of Moslem law. It begins more than 14 centuries ago (Wafica Ali Ghoul, 2011). Differently from Moslem law that is practiced and regulates relations mostly in Moslem environment, elements and mechanisms of Islamic economic model, by virtue of its universality, could be applied in practice in eny economic system, actually.

Global financial crisis that shook the world in years 2008-2011 and its consequences that still have their echoes, stimulated the global community to search for alternative ways of doing business, formation of alternative financial systems. In recent years Islamic financial system showed an active development in non-Moslem countries, too. Islamic banks, insurance (takaful) companies, specializes funds, Islamic bonds (sukuk) are already an integral part of financial market of a whole range if Western countries.

DISPERSION OF ISLAMIC FINANCIAL INSTITUTES IN EUROPE

There is an opinion that promotion of Islamic financial institutes and instruments in non-Moslem countries is a result of oil crisis of 70s years of XX century, when, on the background of oil price growth, rich countries of Persian Gulf states to extend their influence geography (Sobol I., 2015). So, nearly all Islamic banks creates in 70s were partially and even completely financed by oil companies.

The present Islamic business geography covers more than 75 countries, including countries of Europe, CIS, USA, Australia etc., where at present day are functioning more than 300 of Islamic financial institutes (Islamic Finance in Europe, 2013; Philipp Warckerbeck, P., 2006).

Although at present scale of entrance of Islamic financial institutes in European economic the seriousness of Islamic financial system as alternative to traditional system in countries of EC seems to be rather doubtful. For example, in Great Britain the cost of Islamic banks assets is estimated as 19 billion GBP (it is less than 1% of total amount of British banking sector assets). For now in USA are operating 2 Islamic banks (Sobol I., 2015). And in European countries with the largest number of Moslem population, France and Germane, there are still no full-fledged Islamic banks present in Asian countries (Trakic, A., 2012).

In Table 1 are represented data on quantity of Islamic banks by separate countries of EC. It is important to not that in Great Britain. a leader of this list, there is no any special legislation regulating Islamic banks (Al Akhmed M. H., 2015). Here operation of Islamic banking is performed in frames of already existing legal base for traditional banks.

There should be underlines that in Moslem countries Islamic financial institutes appear and develop at substantial support and by initiative of government too (Archer, Simon, and Rifaat Abdelkarim., 2007). In non-Moslem countries the development of Islamic financial institutes is connected with a need of Moslems living in a country in financial services complying to Sharia. …

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