I was recently introduced to Islamic Finance by a colleague, which I must confess was completely new to me! The introduction was in the form of an invite to an Islamic Finance, Investment & International Relations Conference in June 2012. The invite was accompanied by a precise of the content of the conference prepared by Sheikh (Dr) Shaheed Satardien President at the Muslim Irish Chamber of Commerce.

 The title of the conference is "What is the part that Islamic Finance and Investments can play towards achieving stability and peace?" The general message is that through co-existence and peaceful co-operation financial stability can be achieved.

We would all agree that 2008, the start of the global financial crisis, was a huge wake up call for us all but mostly a wake up call for the world's banking system and the casual way in which money was lent/borrowed! The reprocussions of which are still reverberating through Europe today with the sovereign debt crisis and ongoing bailouts!

During this period the Islamic banking sector was a model of relative stability. They did suffer losses with some collateral damage caused by the global financial implosion but the damage suffered was at a far lesser rate than our own or its Western equivalent! According to Standard & Poors Rating Services, Islamic Finance assets reached approximately $400 billion during 2009 but with a potential market of $4 trillion! Staggering figures.

Why was this? What can we learn from the Islamic financial system? These were questions which I asked myself and this proved to be the catalyst to find out more about Islamic Finance/Banking.

Islamic banking has the same purpose as our own Western banking system: TO MAKE MONEY FOR THE BANKING INSITUTE BY LENDING OUT CAPITAL. But Islam forbids simply lending out money at interest, Islamic rules on transactions have been created to avoid this problem. The basic technique to avoid the prohibition is the sharing of profit and loss via terms such as PROFIT SHARING, SAFEKEEPING, JOINT VENTURE, COST PLUS and LEASING. Terms we are all familar with.

As an example, in an Islamic mortgage transaction instead of loaning the buyer the money to purchase the item a bank might buy the item itself from the seller and resell it to the buyer at a profit, while allowing the buyer to pay the bank in installments. However, the banks profit cannot be made explicit and therefore there are NO additional penalties for late payment. In order to protect itself against default the bank asks for strict collateral. The goods or land is registered to the name of the buyer from the start of the transaction. This is the concept of PROFIT SHARING.

Therefore given this concept and our own recent experiences that borrowing money based on Islamic finance principles has as one of the key points the sharing of RISK (REWARD) between the lender and the borrower. Under such principles it is simply impossible that a borrower assume all RISK whilst the lender gets all REWARD without any risk!

There are many factors as to why there would be an advantage for Islamic Finance in Ireland

- our Corporation Tax Rate of 12.5% one of the lowest in the EU.

- the existing IFSC hub in Dublin with all the necessary infrastructure and support mechanisms.

- we are a member of the EU which is controlled by the ECB with all the supervisory and regulatory rigor that goes with it.

- the Muslim population of Ireland is circa 50,000 and growing in an overall population of circa 4M therefore local demand for Islamic financial services.

- our economy is very open and export driven with exports accounting for approximately 25% of GDP

Therefore based on these key points Ireland has an opportunity to position itself as a centre for Islamic Finance in the EU.

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