Why Islamic Finance?

Islamic Finance is a financial discipline relatively young but has grown very rapidly in recent times. Although the concept itself is as old as Islam, the Islamic banking and finance industry has really taken off in the 1960s with the launch of the Social Bank in Egypt.

What is Islamic Finance?

In essence, the Islamic Finance is a financial system subject to the principles of Sharia. In practice, this means that every aspect of Islamic finance should be developed to allow a fair distribution of wealth and prosperity among the members of the community through business and investment morally acceptable (a concept which corresponds substantially to that of Socially Responsible Investment).

To the extent that the profits should be shared, it is logical that the losses and risks are also shared. To do this, Islamic Finance prohibits any kind of income or capital gain that is not linked to an effort or an acceptable sharing of risks such as interest income. Any type of investment in industries unethical or haram such as alcohol, tobacco, pornography, gambling and weapons are also prohibited.

Luxembourg, first European to rate Sukuk

For some years now, Luxembourg began its evolution to become a global center for Islamic finance. The Government has taken timely and appropriate measures implemented sufficient resources in order to develop the market for Islamic finance. The Grand Duchy of Luxembourg has been the first country in the European Union to be admitted to the Council of Islamic Financial Services Board ('IFSB'), the Luxembourg Stock Exchange was the first European to rate the Sukuk, and economic missions in the Gulf and Middle East were frequently organized by the Luxembourg Government.

Moreover, Luxembourg is naturally positioned to attract Islamic finance projects with its multicultural workforce highly skilled, its flexible legal and regulatory environment, flexible and conducive to cross-border trade and investment (investment vehicles compatible with the Islamic Finance, Securitization Act) and its industry investment funds world-renowned (Luxembourg is indeed the second world center for investment funds after the United States).

Another argument in favor of the Grand Duchy of Luxembourg is its favorable tax regime, soft and flexible, which is constantly changing to go to meet the needs of investors. Indeed, in the context of Islamic Finance, the Luxembourg tax authorities have issued two circulars tax in 2010 that describe the basic principles of Islamic Finance, Sharia define certain financial instruments compliant (Musharaka, Ijara, Istisn'a, Murabaha, Sukuk, Mudaraba ...) and clarify the tax treatment of Luxembourg Murabaha and Sukuk in direct taxes and the tax treatment of Murahaba and Ijara in registration fees and VAT.

As of today, the Grand Duchy of Luxembourg is already the largest non-Muslim world center of Islamic investment funds with 7% market share. Moreover, sukuk are currently sixteen sides to the Luxembourg Stock Exchange. Our website dedicated to Islamic Finance in Luxembourg - http://www.sharia-finance.lu - has just been launched and is structured around five main sections: What is Islamic Finance, the instruments Financial complies with Shari'a, Islamic investment funds, why Luxembourg in the context of Islamic Finance and a glossary, useful links and news related to Islamic Finance.