Gulf investors to set up first Islamic bank in the euro zone

Eurisbank, backed by a consortium, is to be launched in Luxembourg. Noor Islamic Bank, meanwhile might sell some of its shares to the public within the next five years amid rising demand.

Hussein AlQemzi, the chief executive of Noor Islamic Bank, says the bank might sell some of its shares to the public within the next five years. Satish Kumar / The National

Gulf investors, including members of UAE royal circles, are to set up the first Islamic bank in the euro zone, it was announced yesterday.
Eurisbank, backed by a "consortium comprising a reputable bank, royal families and a group of elite businessmen in the Gulf Cooperation Council", is to be launched in Luxembourg.
It will be first Sharia-compliant bank to operate in the euro currency zone. There are already several Islamic banks in Britain, which is not in the euro zone.
The announcement was made at the Global Islamic Economy Summit in Dubai.
Marco Lichtfous, Luxembourg partner in the international accounting firm Deloitte, which is advising the new bank, indicated that the royal involvement consisted of a member of a UAE royal family.
The bank will have a start up capital of ?60 million (Dh298.4m) and aims to have branches in Paris, Brussels, the Netherlands and Frankfurt.
The Luxembourg financial company Excellencia Investment Management is also advising on the initiative.
Mr Lichtfous said the reason for the start-up was that "considerable potential exists for the expansion of Islamic finance. This will be the first bank in the euro zone and Luxembourg's geographical position makes it the right place for the new bank". Luxembourg is already a centre for Islamic bond and fund business, he pointed out.
The bank would initially aim to provide very wealthy people with private banking facilities and services.
The growth in demand for Islamic banking was also making itself felt within the Emirates' borders yesterday.
Noor Islamic Bank, a Dubai-based Sharia-compliant lender established in 2008, said it might sell some of its shares to the public within the next five years amid the rising demand.
"It will definitely be within the next five years," said Hussain Al Qemzi, the bank's chief executive. "If the market is growing then it's something that comes naturally. It's being discussed but there is no plan yet."
Mr Al Qemzi, who is also the CEO of Noor Investment Group, said the Islamic banking industry is expected to capture 50 per cent of the total banking market in the UAE within the next 10 years. It currently has a 20 per cent market share, he said.
The bank, like many of its competitors, is increasing its efforts to make Islamic banking, where interest is prohibited, more appealing to non-Muslims.
Disillusionment with conventional banking following the 2008 financial crisis is one reason that has prompted non-Muslims to seek an Islamic alternative, Mr Al Qemzi said.
Instead of interest, Islamic banks use financial instruments like murabaha where the bank would buy the home of a customer seeking a mortgage and allow him to buy back the house in instalments at an agreed markup called the profit rate.
Noor Islamic, in which the Government of Dubai has a 50 per cent stake, has no immediate plans to raise other forms of financing like sukuk, the Islamic equivalent of a bond, because its growth is still organic and the bank is not in acquisition mode, Mr Al Qemzi said.
"We're not seeking any acquisitions at the moment. If there is an opportunity we will consider it, but our focus has been on the bank, doing the basic ops and getting ourselves profitable and getting our roots strong, the bank the asset management, consumer banking."
The bank is focusing on making consumer banking more efficient through the use of technology to replace visits to the bank, Mr Al Qemzi said. It's also offering products, such as mortgages to non-UAE residents, that are not widely available at other banks.
Mortgages to non-UAE residents have been particularly popular with residents of Saudi Arabia and other GCC countries, according to John Chang, the lender's head of consumer banking.
[e-mail]
[e-mail]