Prof Paolo Biancone is Associate Professor of Business Administration, Faculty of Economics, University of Torino. Director of the European Centre for Research of Islamic Finance, in the Department of Management at the University of Turin in Italy.
Q : Turin today launches Islamic finance under the Mole: the target is to build the new hub for the south of Europe ?
A : The scientific interest for Islamic finance in the territory is directed really by the European Research Centre for Islamic Finance at the University of Turin, that was created few years ago with the objective of being a hub for satisfying the desire of knowledge of all those who are searching for information, research sources and updates on the subject, with specific focus on the accounting principles of the balance sheet of Islamic banks. “Our aim” – Professor Biancone explains – “is to expand more and more our specialization in order to represent a center of spreading the knowledge to national and international level, encouraging a possible integration between our banking system and the alternative one that undoubtedly would bring important benefits to the Italian economy “.
The Islamic financial intermediary system that was risen a little more than thirty years ago; represents; developments of 15-20% per year and its activity is based on the moral and ethical principles of Sharia law, in compliance with the dictates of the Koran that prohibits the application of interest rates and the realization of profits based on an excessive uncertainty. The Muslim population in the world today is around 1.6 billion people while the presence of Muslims in Italy (according to the estimates) has reached more than 1.2 million people. To the Muslim religion, corresponds an alternative model of finance, the Islamic finance, which today is present in approximately 75 countries of the world with a total of activity for more than 1000 billion dollars; it is characterized by the combination of finance, ethical and moral values, these lasts determinants in the definition of the rules and standards underlying the operation of the Islamic banking system, which result in different precepts, the most important of which is the prohibition payments of interest.
“Towards this alternative model of finance,” the professor underlines, “in Italy are still prevalent lack of knowledge and problems related to coordination with the national system and with the capital requirements set by the Basel Committee, but nothing is impossible if you consider that other European countries have encountered (and evidently overcame) similar problems, through the installation of real investment Islamic banks or at least of an Islamic window in branches of traditional banks. For this reason the group of researchers that is part of the Research Centre are working on studying the possibility of financing the metro line with Sukuk: are bonds that are Sharia compliant in which in the Islamic law it is prohibited to take loan with interest. Sukuk can be considered similar to Corporate bonds but Sharia complaint.
But contrary to bonds, Sukuk shall correspond to a determined project – usually a real estate or infrastructural project. So, while a conventional bond is a promise to repay a debt, the sukuk consist of ownership of a share of a debt (sukuk murabaha), of an asset (the Ijara sukuk), of a project (sukuk istisna), of a business (sukuk musharaka) or of an investment (sukuk Istithmar).
The researchers of the Research Centre of the University of Turin are also studying the possibility for utilities companies to be present in an Islamic financial index and to issue Islamic sukuk to finance itself. Our commitment,” concludes Professor Biancone, “is to do research that it is both stimulates and drives force for the development of the territory.”