DANANEER for Islamic Finance Consulting and Training Services

The Islamic finance industry in Luxembourg: Advantages, opportunities and challenges By Sufian Bataineh, Managing Director, Dananeer, Luxembourg Historical background and recent developments Luxembourg has a long history in Islamic finance that dates back to 1978 when the Islamic Banking System Holdings Limited Luxembourg was established as the first Islamic financial institution in Europe. This was followed by the establishment of Takafol S.A. in 1982, the first Islamic insurance company in Europe. Such history has improved the attractiveness of Luxembourg within Islamic finance industry. In this context, the main recent developments are the following:  Since April 2008, the Minister of Finance has set up a task force bringing together key actors of the Islamic finance industry in Luxembourg. Its mission is to look at how Islamic finance can be further developed in Luxembourg.  In 2008, the Association of the Luxembourg Funds Industry (ALFI) launched a working group focusing on the development of Luxembourg as a centre of excellence for Shariah compliant funds. In early 2009, the Luxembourg Deutsche Bank launched "Al Mi'yar", a Luxembourg domiciled platform which aims at smoothing the issuance of Shariah compliant securities. In 2009, the Central Bank of Luxembourg became a member of the Islamic Financial Services Board (IFSB) and, as such, is the first Central Bank of the European Union to become a member of that institution. In January 2010, the Luxembourg Tax Authority published a circular, the object of which is to clarify the tax treatment of Murabaha and Sukuk transactions and ensure that they benefit from the same tax treatment as conventional financing products. In April 2010, Luxembourg for Finance (LFF) issued a brochure describing in detail the vehicles available in Luxembourg for Islamic finance transactions and structures. In May 2010, the Central Bank of Luxembourg managed to get the