Geneva : Rabi Al Awwal 24 1429/ April 01, 2008 – As Islamic finance and banking products continue to grow and attract more clients, Switzerland, a world financial hub, will soon get its second Shariah-compliant bank in less that two years. “There is demand,” Ibrahim Dabdoub, chief executive officer of the National Bank of Kuwait (NBK) which plans to set up the new bank, told the Financial Times. NBK applied for regulatory approval to set up the bank with a Saudi partner, Dabdoub said. The Islamic institution, set to be launched before the end of year, will target investors and wealthy individuals from the Gulf region, which is currently awash with liquidity fueled by the windfall from unprecedented, sky-high oil prices.
“Switzerland is still a haven for people who want to keep money outside,” Dabdoub explained. The new bank will be the second private Islamic bank established in Switzerland. In 2006, Faisal Private Bank opened in Geneva, becoming the first in the country to operate according to Shariah principles. Islam forbids Muslims from usury, receiving or paying interest on loans. Islamic bankers and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.
Shariah-compliant banking deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships. “The sukuk market has held up fairly well,” Bossuyt said.
Switzerland’s new Islamic bank is only the latest of Shari`ah-compliant finance institutions in the West. “At some point some of the big investment managers will set up Islamic funds, both in London and the US,” said Davide Barzilai, senior associate in Islamic finance at London-based law firm Norton Rose.