​The opportunities and challenges of Islamic finance in Europe: What can be learned from the example of the United Kingdom?

Abstract

This study examines the development of Islamic finance in Europe, using the United Kingdom (UK) as a case study. Islamic finance is an interest-free alternative to conventional finance that prioritizes risk-sharing, ethical investment, and asset-backed financing. Islamic finance has grown rapidly in recent decades, but remains underdeveloped in Europe, with the UK years ahead of other countries. Therefore, this study evaluates the experience of the UK to derive insights that can be applied to a broader European context. Interviews with industry experts in the UK were conducted to hear their perspectives on the region's development.

The findings identify many barriers to the growth of Islamic finance in Europe, including regulatory challenges, limited government support, product standardization issues, and hostility towards Islam. Conversely, it also highlights several growth factors, such as the growing Muslim population, increasing demand for ethical financial products, and greater public awareness. Moreover, the study discusses the potential benefits of Islamic finance, including economic growth, financial inclusion, and alignment with sustainability and social responsibility trends.

Ultimately, this thesis suggests that other European countries look to the example of the UK to better navigate this emerging industry.