Italy is one of the most rapidly developing markets in Europe. A number of initiatives have been taken by Italian authorities to study the issues related to an expanded presence of Islamic finance. The Banca d’Italia, for example, has hosted a number of conferences on the subject. ABI, the Italian Banking Association, is currently coordinating a working group related to the issuance of a corporate or sovereign sukuk.

Meanwhile, SIMEST (a financial institution supporting the development and promotion of Italian enterprises abroad) is working on the possibility of launching a “Mediterranean Partnership Fund”, part of which would be Shari’ah-compliant. This initiative, dedicated to promoting small and medium-sized enterprises in the MENA region through equity or semi-equity instruments, may involve the Union of Arab Banks, several Arab governments and Islamic multilateral development banks – hence the proposal to introduce a Shari’ah-compliant component to this fund.

According to market estimates, Islamic retail banking deposits among Italy’s diverse Muslim community could reach USD 5.8 billion and generate revenues of USD 218.6 million by 2015, with these figures rising to USD 33.4 billion and USD 1.2 billion respectively by 2050. Meanwhile, efforts have also been made by a local bank to set up a working group on the introduction of a Shari’ah-compliant home finance product.

In the wholesale banking area, a number of institutions are active in the Islamic capital market (mostly in terms of trade finance, murabahah and participation in syndication facilities) via foreign offices or wholly-owned foreign subsidiaries. Italian banks have also been active in the GCC region, more specifically in private-public partnerships. In addition, there are a number of bilateral trade ties between Italy and GCC-based institutions that have been successful in introducing Islamic insurance products for group employee benefit purposes.

Baljeet Kaur Grewal
European Central Bank