-- Seeking to get a share in the growing Islamic finance industry, the Irish government has presented a new bill allowing Shari`ah-compliant financial transactions, reported the Irish Times on Friday, February 5.

“(The measure is) one of the most significant boosts for the IFSC [International Financial Services Center] in the last decade,” said director Brendan Kelly.

Minister for Finance Brian Lenihan on Thursday proposed amending tax laws to allow Shari`ah-compliant transactions.

The changes would help to “make Ireland the location of choice as firms rebuild in the aftermath of the global economic crisis,” Kelly said.

The new provisions will treat returns on Shari`ah-compliant products as interest for taxations purposes.

The proposed amendments were included in the Finance Bill presented to the Irish parliament on Thursday.

Though the amendments are confined to wholesale financial markets for the time being, they are expected to be expanded to include retail banking in the near future.

The measure covers a range of credit transactions and allows for the creation of investment securities similar to sukuks (Islamic bonds).

Islam forbids Muslims from usury, receiving or paying interest on loans.

Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.

Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.

Investment Magnet

The government hopes the move will boost the Republic’s attractiveness to Islamic financial services.

"Permitting and then encouraging different, non-Anglo Saxon or non-Western, forms of financing and investing is a most welcome announcement," Aidan Walsh, Corporate Tax partner with Ernest & Young, said.

"(This measure) will help further enhance our international attractiveness."

A report by Ernst & Young showed last week that Ireland has the world’s third most globalized economy.

"Ireland has benefited tremendously from globalization with over 80% of our goods and services exported internationally," Walsh said.

The Islamic banking system is being practiced in 50 countries worldwide, making it one of the fastest growing sectors in the global financial industry.

Starting almost three decades ago, the Islamic banking industry has made substantial growth and attracted the attention of investors and bankers across the world.

A long list of international institutions, including Citigroup, HSBC and Deutsche Bank, are going into the Islamic banking business.

Currently, there are nearly 300 Islamic banks and financial institutions worldwide whose assets are predicted to grow to $1 trillion by 2013.

Source: IslamOnline.net