ON Rule for Islamic financial services
Archived message of the Austrian Standards Institute
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Around 25 million Muslims live in the European Union and approximately 600,000 in Austria. Just like other products and services meeting basic needs, financial services have to comply with certain rules in Islam.
Vienna (AS prm, 2010-05-06)
On the initiative of the Islamic Information and Documentation Centre in Austria (IIDZ Austria), an ON Rule (ONR) ONR 142001-1 on Islamic banking was developed at the Austrian Standards Institute.
Europe’s first normative document on Islamic financial services was published on 1 May 2010 and presented to the public at the Concordia Press Club on 6 May.
Günther Ahmed Rusznak, President of IIDZ Austria and chairman of the working group in charge, explained: “Workshop 1143 for ‘Halal products and services’ that we set up together with the Austrian Standards Institute already produced highly successful guidelines for halal food — food permitted under Islamic law.
In the ON Rule on Islamic banking, we have now defined principles and requirements for financial products and services that both comply with applicable legislation and the Islamic legal system — i.e. Qur’an and Sunnah.”
The Islamic financial services sector…
... comprises both financial institutions and the insurance sector. Given a population of 1.3 billion Muslims world-wide, this sector achieved annual profits of several hundred billion euro in the past few years.
ONR 142001-1 is to give Muslims the assurance that such certified products are in conformity with the rules of Islam.
Moreover, it is to support Austrian and European enterprises in entering this promising market with annual growth rates of 10 to 15 percent.
The panellists (left to right):
- Günther Ahmed Rusznak, President of IIDZ Austria, chairman of Workshops 1143 “Halal products and services”
- Dipl.-Ing. Dr. Karl Grün, Director Development, Austrian Standards Institute
- Dr. Naser Al Ziyadat, Director Strategic Planning, Bait Al-Mashura Finance Consultation Co., Doha, Qatar
- Dr. Johannes Stern, Director PR & Media, Austrian Standards Institute
- Dipl.-Ing. Mohammed Madhoun, International Treasury Markets, Österreichische Volksbanken AG
- Mag. Wilhelm Kerschbaum, retired head of department of Oesterreichische Nationalbank
- Dr. Abdessalam Jelidi, Vienna Economic Chamber, head of the Education policy and vocational training unit
Statements:
Dipl.-Ing. Dr. Karl Grün: “In addition to experts from Austria, renowned international experts were involved in developing this ONR. It is designed to contribute — and will certainly do so — to creating and building trust in, and certainty on, Islamic financial products and services between commercial and retail customers and banks, savings banks, credit institutions and financial service providers.”
Dr. Naser Al Ziyadat stressed that Islamic banking did not refer only to products for or by Muslims. The term rather expressed that business conduct and products were based on fundamental ethical principles.
Moreover, Islamic banking meant that investments in the real economy are involved. This principle proved its worth especially during the recent financial crises: While conventional banks and products had collapsed world-wide, the Islamic banking sector was able to grow by around 25%.
Dipl.-Ing. Mohammed Madhoun highlighted that the rating agency Moody’s estimated the market potential of this sector to amount to US dollar 5 billion in the next four years.
Mag. Wilhelm Kerschbaum stated that the special characteristics of Islamic banking included the backing of investments by real assets and the sharing of profits and losses by the customer and the bank.
Background:
In Islam, there are several legal principles that result in differences between conventional and Islamic banking.
The most important one is the prohibition of interest: Money that is only deposited in a bank must not bear interest and interest must not be charged solely for lending money.
At present, there are only very few suitable financial products for Muslims living in Austria and Europe. Banks have hardly taken notice of this potential target group to date even though it offers great potentials, especially given its age structure — around 40% of the Islamic population is aged under 20 years. Hence, this is a highly promising market for the Austrian and European economy.
Bibliography
ONR 142001-1 Islamic banking; Part 1: Requirements for financial products and financial services
is available at the AS+ web shop.
