Challenges and Opportunities for Islamic Retail Banking in the European Context: Lessons to Be Learnt from a British-German Comparison

Abstract

This article explores the key determinants of Islamic retail banking (IRB) in the European context in order to identify major challenges and opportunities for the European IRB market. This investigation is of relevance, as Islamic banking, that is the Shari’ah (Islamic law) compliant way of banking, is on the rise. During the past three decades the industry expanded with double-digit growth rates and there are now more than 300 Islamic financial institutions operating in over 50 countries worldwide.¹ As Islamic banking was initially developed in recognition of the need of ordinary Muslims for borrowing and lending, the most prevailing activity of Islamic banking in the predominantly Muslim societies of the Gulf and the Far East is retail banking.^2,3 Yet, in most of Europe IRB services offered to the general public are still rare.⁴ This appears to be a missed business opportunity as Europe’s Muslim community of about 50 million⁵ clearly outnumbers the total population of the Arab states in the Persian Gulf region of about 36.2 million.⁶