Paris woos Islamic investment to tackle credit crunch

This news item dates back to October, 2009. We show it so that our readers can see the views of the new Director General of the International Monetary Fund, regarding Islamic Finance.

French Finance Minister Christine Lagarde (photo) is leading a governmental drive to attract investment from Muslim countries, in a bid to turn Paris into the European capital of Islamic finance and help France battle the credit crisis.

The French government announced on Wednesday that within the next two weeks it will be pushing through new tax legislation to make it easier for French firms to attract Islamic financing as the country battles the global credit crunch.

Another tax reform, currently under review by the constitutional council, could allow Islamic “sukuk” bonds to be issued in France and the opening of Islamic retail banking services to French Muslims in 2010.

In the wake of the financial crisis and G20’s call against opaque derivatives trading, French authorities are looking to tap into new sources of credit and offer investors an ethical alternative to traditional investment tools.

With a ban on charging interest and estimated assets worth $700 billion, according to Moody’s rating agency, Islamic finance could be what French authorities are looking for.

Besides implementing legal reforms, Paris argues that Islamic finance and traditional French finance have long shared an opposition to excessive risk-taking.

“The principles we’re fighting for are very well inscribed in Islamic finance,” declared French Finance Minister Christine Lagarde, during a major Islamic Finance Summit organised on Wednesday by The Economist Intelligence Unit.

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