The year 2014 marks the tenth year of Islamic finance in Ireland. The progress that the Irish economy has achieved in the last few years is remarkable, especially compared to what many comparable nations have struggled as the world went through a global economic downturn. Irish gains in Islamic finance are no exception. With funds that comply with Shariah and international sukuk listings released in this country, Ireland remains one of the leaders in Islamic finance in Europe.
Islamic finance avoids interest, gambling, and uncertainty by carrying out banking, insurance, and lending operations in a way that backs them with services, goods, and assets that have real value. This has meant that, in the long run, Islamic finance may hold the key to creating sustainable financial growth that is mirrored by a similar growth in infrastructure and general wellbeing in a region’s population. Islamic finance operates with a moral compass, seeking justice in the relationship between investors and borrowers rather than placing the brunt of the risk on one of the parties in a lopsided, abusive relationship. There are several reasons why Ireland could be considered an ideal European country for the implementation of Islamic finance. Ireland has always been known for its positivity, willingness to innovate, and particular relationship as a gateway into the European Union. Ireland centered much of its economic recovery on boosting commerce, in particular small and medium businesses. This philosophy is also well suited to Islamic financial principles. In this article we take a look at some of the history of Irish Islamic finance and how it has progressed in the last decade.
Ireland’s first steps in Islamic finance occurred in 2003. It was in this year when the Irish management company Oasis Global established two investment firms, Oasis Global Investment Fund and Oasis Crescent Global Investment Fund. In 2004, an important agreement was signed to establish a home financing plan that was compliant with Shariah. In 2005, the first sukuk was listed on the Irish Stock Exchange. This was an important milestone in Ireland’s relationship with the Islamic financial system. By listing sukuk transactions in their stock exchange, Ireland increased their reputation among Islamic banks. The years 2006 and 2007 saw the addition of other Islamic financial instruments to the Irish Stock Exchange, including NICBM Sukuk. In this year funds compliant with Shariah were also launched through SEI and iShares.
In 2008, the Central Bank of Ireland began a relationship with the Dubai Financial Services Authority which helped further Islamic finance in the country. An important tax agreement was also signed with Turkey on that year. Thanks to the enactment of tax regulations that included Islamic financial instruments in the provisions, Ireland was also able to regulate Islamic financial instruments such as Ijarah transactions and Takaful (leasing and insurance, respectively) in their tax code, taxing them in a way that was similar to similar transactions in conventional finance. The year 2009 was an active year in Islamic finance in Ireland, leading also to a double taxation agreement with Bahrain and an amendment to the 1998 taxation agreement with Malaysia.
An important finance bill was passed in 2010. This tax bill included tax legislation amendments that are relevant to Islamic banking transactions. The Central Bank of Ireland entered into relationships with Islamic banks and financial institutions in the United Arab Emirates, Bahrain, and Qatar. The National Bank of Abu Dhabi also established an exchange trading fund in this year, domiciled in Ireland. Tax agreements with Muslim countries continued, with new tax agreements signed with Kuwait and the United Arab Emirates.
In 2011, the Strategy for the International Financial Services Industry in Ireland 2011-2016 was released. This strategy established the paths that Ireland would follow in the development of its international finances and the development of the International Financial Services Center. The strategy was important to Islamic banking because it contained several sections which planned to improve Ireland’s capabilities in the field of Islamic finance and to help establish more efficient, optimized operating environments for these types of financial practices. The Chartered Institute of Management Accountants began to offer a diploma in Islamic Finance, reflecting the importance that Islamic finance had gained in Ireland’s economy. A further relationship was established with the Securities Commission of Malaysia.
Following the agreement with Malaysia, the first Malaysian financial instrument compliant with Shariah was was released in 2012 on the Irish market. NCB Capital, one of the most important financial institutions in Saudi Arabia was the first Saudi entity to establish an important presence in Ireland. Awareness in the public was also increasing, in large part thanks to a conference on Islamic Finance celebrated in Dublin City University that year. By this time, there were various sukuk listed on the Irish Stock Exchange, with the most important being JAFZ Sukuk ($650 million USD), Turkey 2018 Sukuk ($1.5 billion USD), QIIB Sukuk ($700 million USD), and QIB Sukuk ($750 million USD.) The year 2012 was also the year in which tax agreements were signed with Qatar and Egypt, adding to the already large pool of Muslim countries with which Ireland had financial agreements by this time.
In 2013, an important forum in Islamic finance was organized with agreements between Irish and Muslim entities. A very important taxation agreement was established with Saudi Arabia. The year 2013 was also an outstanding year in sukuk listings on the Irish Stock Exchange. There is no doubt that Ireland has made significant progress in its relationship with Islamic finance in the last years. This country’s relationship with Islamic banks and other entities in the world of Islamic finance is only predicted to become more valuable and fruitful in coming years, as the goals of the 2011-2016 financial strategy are met and surpassed.
