Islamic Banking and Finance in the European Union

Islamic Banking and Finance in the European Union

A Challenge

Studies in Islamic Finance, Accounting and Governance series

Edited by M. Fahim Khan and Mario Porzio

This timely book examines the authorization of Shari’ah-compliant intermediaries as either credit institutions or as investment companies in the European Union.


M. Fahim Khan and Mario Porzio

Subjects: economics and finance, financial economics and regulation, islamic economics and finance, money and banking


M. Fahim Khan and Mario Porzio When the Prophet Muhammad began His war to defend poor debtors from the insatiable demands of their lenders, the Christian Church had already condemned usurae: any kind of interest claimed on a loan. However, since the twelfth and thirteenth centuries, economic development created pressure to remove the prohibition, and merchants – especially Italian merchants – thought up many kinds of contract to make profits from their money outside the confines of the church laws (Chapter 1). Almost the same thing happened in the Muslim world, too (Chapter 3). In more modern times, when the needs of growing capitalism prevailed, theologians from the reformed churches (Lutheran and mostly Calvinist) felt that interest on loans was legitimate and, at the same time, in Western Europe civil law had become sharply distinct from religious rules (Castro, 2007; also Chapter 5). So the ‘war’ of the Christian Church ended in defeat, and the Napoleonic civil code of 1804 definitely allowed paying out interest for any type of cash loan. This code was widespread and was especially enforced in Egypt by the French army; although obviously, during the time of colonization, the European laws were valid in every country colonized. In the frame of decolonization, the prohibition of riba was again under discussion in most Islamic-profile countries and the first formal attempt to put the concept of Islamic banking in practice is often reported to have taken place in Egypt – an historical joke – around 1963, when a savings bank was opened...