LONDON-BASED Gatehouse Bank, the latest Islamic bank to be authorized by the UK’s Financial Services Authority (FSA), has become the first Islamic bank to join Paris Europlace, an organization that promotes Paris as a financial center. Paris Europlace has over the last two years also started to focus on the Islamic finance sector and established an Islamic Finance Commission in December 2007.

Gatehouse Bank will, in fact, participate in the work of this commission which supposedly acts as a focal point for the Islamic financial community in France and whose opinions are listened to by the French government. This commission is akin to the Islamic Finance Committee of the UK Trade and Investment (UKTI), the UK government entity that supports companies trading internationally and overseas enterprises seeking to locate in Britain.

The bank’s membership of Paris Europlace is also a statement of intent about its perception of the French market and opportunities there, including Shariah advisory services, real estate, wealth management, asset management, treasury, capital markets and off balance sheet investments.

Richard Thomas, CEO of Gatehouse Bank, stressed that “Islamic Finance has a bright future in France with its large Muslim population and trade links with many Islamic economies. The support of the French government and championing by Paris Europlace will help the development of a French Islamic financial infrastructure.”

Thomas is under no illusion that passporting Islamic financial services from London into France will be that simple. “We are keeping a close eye on developments in France, although the French have still got a long way to go in achieving their objectives no matter what their PR might say. We have an ambitious French project underway which is ongoing and looking at France as a jurisdiction for Islamic finance to internationalize the reach of Islamic finance as a mode of finance,” he explained in a recent interview.

“This project also tracks and helps with the development of Islamic finance in France, and we would extend that to any mature economy in Europe that is interested to learn from the experience in London. It depends on the ability of the market to open up there. We would keep a commercial interest there as well in the medium term. We have an interest in the infrastructural development of France as a center for Islamic finance in Europe. We also have an interest in France as a destination for investment capital. We are interested in investing in French property,” he added.

Gatehouse Bank has appointed Antoine R. Chemali, associate vice president, to coordinate its French strategy. French banks, funds and private offices, said Chemali, are already showing interest in Islamic capital markets and syndicated financings, institutional wealth management, treasury products, real estate and Shariah advisory services. Gatehouse Bank is already in negotiations with some of them who are interested in the bank’s specialized products concepts such as the first Islamic water fund and London Office Recovery Fund.

“It is fascinating to see the demand for Islamic investment vehicles among both Muslim and non-Muslim investors, as their Shariah compliant principles create a solid foundation for managing risk and acting ethically,” he added.

France, which has an estimated Muslim population of between 8 million to 10 million, is potentially the largest domestic market for Islamic finance in Europe. In recent months, the French government, with the encouragement of President Nicolas Sarkozy, has stepped up the development of its legal and regulatory framework to facilitate Islamic financial transactions in jurisdiction.

In September 2009, for instance, the French National Assembly amended Article 2011 of the French Civil Code relating to the formation of trusts. The amendment is generally regarded as a positive step toward facilitating the origination of Sukuk (Islamic securities) out of France.

France hopes that this amendment, first approved by the Senate in June 2009, will help the Sukuk market take off in France. President Sarkozy earlier this year publicly declared that his government supports the facilitation of Islamic finance products in France under the country’s financial inclusion policy and is keen to make Paris the other Islamic finance hub in Europe.

In April 2009, the French government started to overhaul its tax laws to facilitate Islamic financial transactions such as Sukuk and Murabaha (cost-plus-financing) used primarily in commodity finance. This move has been on the cards since the summer of 2008 when Paris announced that it had started its tax neutrality review to facilitate Islamic financial products.

France is also keen to attract Islamic investment both at home and through joint ventures in third countries.