Islamic Finance made in Germany: The 2004 Sukuk Issue by the State of Saxony-Anhalt

Dossier / Travail , 2011 , 7 Pages , Note: 1,33

Economie politique - Finances

Those who live off the interest on loans will never stand up, except in the way those whom Satan knocks down with a fit rise up again. That is because they say: "Trading is just like taking interest." Yet God has permitted trading and forbidden taking interest (qurantoday.com, 2011). The German state Saxony-Anhalt, in July 2004, took the unprecedented step to benefit from this Islamic rule and raised debt in a new way. By issuing a “sukuk” debt instrument, conforming to Islamic principles, the Bundesland located in East Germany and by West German standards considered as under-developed was the first one among the OECD countries to enter a new path of raising public funds (rundschau-online.de, 2009). While there are until today no genuine Islamic banks in Germany – unlike the situation in Great Britain -, the ministry of finance of the state was convinced of the opportunities linked to such a financial structuring, aiming to raise €100m.
This report analyzes the given German sukuk issuance and compares and contrasts it to conventional products. For this, I will first give a general overview of the chosen product, describing the rationale behind the instrument, and then explain in detail the specific features relating it to Islamic finance. I will then discuss key differences and similarities of the financial instrument vis-à-vis regular products, including demand and supply considerations, before concluding by giving a view on the overall situation of Islamic finance in Germany.

Inhaltsverzeichnis (Table of Contents)

• Introduction
• Overview of the Saxony-Anhalt Sukuk
• Development
• Discussion and Conclusion

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This report provides an analysis of the 2004 Sukuk issuance by the German state of Saxony-Anhalt, comparing and contrasting it with conventional financial products. The report aims to explore the rationale behind the Sukuk, its specific features, and its key differences and similarities to traditional instruments.

• The rise of Islamic finance in Germany
• The structure and features of the Saxony-Anhalt Sukuk
• Comparison of Sukuk to conventional debt instruments
• The potential and challenges of Islamic finance in Germany
• The impact of the Saxony-Anhalt Sukuk on the market for Islamic finance

Zusammenfassung der Kapitel (Chapter Summaries)

• Introduction: The report introduces the concept of Islamic finance and its principles, highlighting the state of Saxony-Anhalt's pioneering role in issuing the first European-based Islamic bond (Sukuk) in 2004.
• Overview of the Saxony-Anhalt Sukuk: This section provides background information about the Sukuk, discussing the state's financial situation, its motivation for issuing the Sukuk, and its target investors.
• Development: This section delves into the structure of the Saxony-Anhalt Sukuk, explaining the Sukuk Al Ijara framework and its implementation in the transaction. It highlights the role of the Special Purpose Vehicle (SPV) and the lease-back arrangement with the state.

Schlüsselwörter (Keywords)

This report focuses on Islamic finance, Sukuk, Saxony-Anhalt, Germany, conventional debt instruments, financial structuring, asset-backed securities, Shari'ah compliance, SPV, lease-back arrangements, and the impact of Islamic finance on the German market.

• Université: IE Business School, Madrid
• Note: 1,33
• Auteur: Anonym (Auteur)
• Année de publication: 2011
• Pages: 7
• N° de catalogue: V176319
• ISBN (ebook): 9783640974375
• Langue: anglais
• mots-clé: islamic, finance, germany, sukuk, issue, state, saxony-anhalt