Paris Seeks to Become Capital of Islamic Finance

French politics might live uneasily with Islam--battling over burkas, sparring over veils--but French economists are keen to make Islamic finance a crisis buster in Paris. Finance minister Christine Lagarde is trying to attract Islamic banking, which has grown 10 to 15 percent a year since 2003 to become a global industry totaling more than $700 billion today. That's a smart move: the global economic meltdown has made Sharia-compatible finance especially attractive. Islamic banking eschews much of the risky behavior that brought conventional finance to its knees, including speculation; it also prohibits interest, helping to prevent debt spirals. And since it favors long-term investment in real estate and infrastructure, it could provide much-needed cash for France's economy. A 2008 report for lobbying group Paris Europlace argued France could become a global leader in the field, drawing $145 billion in capital by 2020 and challenging London's current dominance in the West. To create a market in France, Lagarde is working to smooth out the remaining tax and legal obstacles to full Sharia-friendliness. Insiders think her friendly signals to Muslim investors abroad will outweigh her colleagues' burka bouts.

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