By Sudip Kar-Gupta
France is set to adjust its legal and fiscal framework to accommodate Islamic bonds this year.
France is set to adjust its legal and fiscal framework to accommodate Islamic bonds this year, a leading Paris official told Reuters, as the French capital looks to attract business in this potentially fast-growing industry.
"Work is well advanced on the matter of hosting sukuk (Islamic bond) emissions," Paris Europlace Managing Director Arnaud de Bresson said in an interview. Paris Europlace is a body that promotes the French capital's business interests.
"We are confident that the new fiscal and regulatory framework (for sukuks) will be finalised during the year, perhaps even during the first half of the year," he added.
Sukuk bonds are a flagship product of the Islamic finance industry, and Paris has been looking to keep up with London in attracting business in a sector estimated to be worth at least $1 trillion.
However, the sector suffered last year in the wake of debt problems in Dubai, when Dubai World's Nakheel property unit asked for three listed Islamic bonds worth $5.25 billion to be suspended pending restructuring.
At least one French sukuk bond was also delayed last year due to legal hurdles.
Gilles Saint Marc, a member of Paris Europlace's Islamic Finance committee, told a Reuters Summit last month that France was still examining tax and legal changes to avoid double taxation of Islamic products.
The credit crisis also hit the Islamic bond market, but Europlace's de Bresson is confident that sukuk bonds will be issued in Paris once more favourable market conditions return.
"As soon as the market recovers, we will be in a position to host sukuk emissions," he said.
Sukuk bonds are structured as profit-sharing or rental agreements, with returns derived from underlying assets since Islamic laws prohibit paying or earning interest.
Britain has made the most progress on developing an Islamic finance market in Europe, with a London-based private healthcare organisation set to issue the first-ever Islamic bond in the UK this month.
In 2004, the Islamic Bank of Britain -- the country's first sharia-compliant high street bank -- opened in the UK and one Paris banking official said French authorities were looking to see if something similar could be established in France.
"There has been contact with a certain number of investors to look into the possibility of developing a fully fledged Islamic bank in Paris," said the French banker, who declined to be identified. (Reuters)