The issuance by Saxony-Anhalt attracted strong demand and was fully subscribed, with 60% of the issue going to investors in Bahrain and the UAE and the remaining 40% to investors in Europe, particularly those in France and Germany.

The €100 million Ijarah sukuk (Islamic sale-and-leaseback debt instrument) was fully redeemed in 2009. In 2009, Germany’s Federal Financial Supervisory Authority (BaFin) accepted a request from a foreign institution to conduct banking operations within the country in accordance with Islamic principles. However, without a full banking licence, the range of offerings remained limited. A follow-up conference on Islamic finance was organised by BaFin in May 2012, which had a special focus on Shari’ah-compliant capital market products (Islamic funds, sukuk and asset-backed securities).

The German market has also witnessed the offering of a new Shari’ah-compliant investment product that is benchmarked to the WestLB Islamic Deutschland Index. This is comprised of shares in ten German firms whose business activities are conducted in line with the Shari’ah. German financial institutions also actively participate in the Islamic finance industry via their subsidiaries in London, Dubai and Kuala Lumpur. These institutions could play a key role in attracting Shari’ah-compliant funds to Germany through their established networks and expertise.

The prospects for the further development of Islamic finance in Germany are rather solid. First, Germany is the largest economy in Europe and it features the largest Muslim population (4.1 million people, against 3.5 million in France and 2.9 million in the UK). Second, German exporters could use institutions offering Islamic financing solutions as alternative sources of funding and thereby further enhance their funding profiles. Third, Islamic trade finance products offer the potential to strengthen trade ties with countries such as Turkey; a country which is an active trading partner of Germany and that has a budding Islamic finance sector.