Developments and Prospects for Islamic Finance in Italy

Since the establishment of the first Islamic retail bank in the UK, in 2004, several European countries have developed a regulatory and fiscal treatment for Sharıʿa-compliant financial products and services. Italy formally joined this trend in 2010, when the Bank of Italy issued the first guidelines aimed at comparing Islamic finance with the conventional financial and banking system. This chapter provides an analysis of the current knowledge and highlights the uncertainties with regard to the accommodation of Islamic finance in Italy. Although there are no major regulatory barriers, and already there is a wide range of financial instruments which could easily be adapted to the scope and objectives of Islamic finance, some issues, such as limited political support for specific fiscal adjustments and poor technical expertise, still prevent the full integration of Islamic finance into the national market. On the other hand, the evidence arising from the analysis of the individual initiatives of market players and the legal framework showed that a number of Italian contracts and investment mechanisms could facilitate the implementation of Islamic finance for the benefits of national Small and Medium Enterprises (SMEs) and financial inclusion. The research suggests that the analysis of the complementarity between ethical banking and Sharıʿa-compliant investments is worthy of further research. Despite the divergent operating standards and parameters, the case study of socially responsible investment discloses unsuspected commonalities regarding concept and vision of values-oriented financial systems. Best practices of cooperative and ethical banking are likely to help establish a level playing field for Islamic finance in Italy by pointing out the compatibility of financial transactions which pursue similar socio-economic goals while maintaining different operational backgrounds.