Developments and Prospects for Islamic Finance in Italy

  • Sabrina Iannazzone
Part of the Palgrave Studies in Islamic Banking, Finance, and Economics book series (IBFE)


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.


Islamic finance Islamic banking Italy Ethical finance Islam Ṣukūk SME Mini-bonds Socially Responsible Investment 

Abbreviations and Acronyms


Accounting and Auditing Organization for Islamic Financial Institutions


Associazione Bancaria Italiana


Asset-backed security


Associazione Italiana degli Analisti Finanziari


Associazione per lo Sviluppo di Strumenti Alternativi e di Innovazione Finanziaria


Banche di Credito Cooperativo


Cassa di Risparmio di Fabriano e Cupramontana


Centro Studi di Politica Internazionale


Commissione Nazionale per le Società e la Borsa


Comunità Religiosa Islamica Italiana


Corporate Social Responsibility


European Central Bank


Environmental, Social, Governance


European Union


Euro Interbank Offered Rate


European Sustainable Investment Forum


Fédération Européenne de Finances et Banques Ethiques et Alternatives


Financial Services Authority


Gulf Cooperation Council


International Accounting Standards/International Financial Reporting Standards


Islamic banking and finance


Islamic financial institution(s)


Islamic Financial Services Board


International Islamic Financial Market


International Labor Organization


Islamic moral economy


Islamic Educational, Scientific and Cultural Organization


Islamic finance lawyers


Istituto Nazionale di Statistica


London Interbank Offered Rate


Middle East and North Africa


Mercato telematico delle obbligazioni e dei titoli di Stato


Morally responsible investment(s)


Organization for Economic Co-operation and Development


Organismi di Investimento Collettivo del Risparmio


Organizzazione Non Lucrativa di Utilità Sociale


Peace Be Upon Him


Profit and Loss Sharing


Sustainable Development Goals


Stamp Duty Land Tax


Social, Environmental, Ethical


Società Europea di Finanza Etica e Alternativa


Società di Gestione del Risparmio


Società di investimento a capitale fisso


Società di investimento a capitale variabile


Società Italiana per le Imprese all’Estero


Small and Medium Enterprise(s)


Società per Azioni


Special purpose vehicle


Socially responsible investment(s)


Sharīʿa Supervisory Board


Testo Unico delle Imposte sui Redditi


Undertakings for Collective Investment in Transferable Securities


Value Added Tax


Glossary of Selected Foreign Words

associazione in partecipazione

Type of joint venture where an entrepreneur has a partnership with associate(s) who undertake to carry out an activity for the company and have the right to obtain a share of the company’s profits as remuneration. Likewise, associates take partial responsibility for the business risk.

cinque per mille

Literally: five for a thousand. It is a fiscal measure that allows taxpayers to allocate a share of their personal income taxation to organizations dealing with activities performed in the public interest. It is free of charge for citizens, though it is not considered as a donation.

Ḥadīth (plural: aḥādīth)

A saying, deed, or endorsement of the Prophet (PBUH) narrated and transmitted by his Companions.

ḥalāl and ḥarām

Things or activities that are permitted and prohibited by Sharīʿa, respectively.


Leasing; the sale of usufruct of an asset.


A contract whereby a manufacturer agrees to produce and deliver a pre-determined product at a given price on a given date in the future. Unlike salam, the payment is not made in advance—the parties may agree on the payment method.


Literally, public interest. It refers to any action taken to protect the public interest and common good. It can be used as a secondary legal source to establish legal rules or issue juridical opinions.


A contract whereby a financier, rab al-māl, and an investment manager, muḍārib, enter into a partnership. Profit is distributed in accordance with the ratio upon which both parties agree at the time of the contract, while loss is borne only by the financier.


Sale at a specified profit margin or markup. It refers to a sale agreement whereby the seller purchases the good(s) on behalf of the buyer and then sells them at an agreed marked-up price, which includes the cost of the risk borne by the seller as long as it holds ownership of the good(s). Delivery to the buyer and the payment method are settled within an agreed time frame.


A partnership agreement or joint venture according to which all partners participate in the management as well as the provision of capital and share in the profit and loss. Profits are distributed between the partners in accordance with the ratios initially set, whereas loss is distributed in proportion to each partner’s share in the capital.

organismo di investimento collettivo del risparmio

Category of financial intermediaries offering collective asset management services. These services include the promotion, establishment, and organization of mutual funds and the management of relations with the participants.

organizzazione non lucrativa di utilità sociale

Private entity, with or without legal personality, which carries out no-profit activities with the exclusive purpose of social solidarity. It must operate in one of the sectors identified in the legislative act 460/4 December 1997, and it cannot carry out activities other than those indicated in its statute. Profits have to be used for the implementation of planned activities and cannot be distributed between its members.


The Holy Book of Islam, consisting of the revelations made by God to the Prophet (PBUH).


Literally, increase, addition, or growth. Technically, it refers to the compensation that the borrower must pay to the lender along with the principal amount as a condition for the loan or an extension in its maturity. Nowadays, it is understood as interest or usury, since any form of interest is deemed to be usury in accordance with Sharīʿa.


a sale in which payment is made in advance by the buyer, and the delivery of the good is deferred by the seller.


The corpus of Islamic Law; the path of conduct based on Divine guidance as given by Qur’ān and Sunna. It embodies all aspects of the Islamic faith and way of life.

Sharikat al-‘aqd

Joint commercial enterprise effected by a mutual contract.


(singular: ṣakk): these are Islamic investment certificates backed by real underlying assets relating to specific projects or investment activities. Ṣukūk provide their holders with undivided shares in the ownership of the underlying asset(s), along with the commensurate cash flows and risk.


It refers to the Prophet’s (PBUH) example as indicated by his practice of the faith. The only way to know Sunna is through the collection of aḥādīth.


The Islamic form of insurance based on the principles of mutual support and solidarity. A group of persons agree to share a certain risk by regularly donating a pre-determined sum to a Takāful operator. In the case of loss to any of the group, the loss is met from the collected funds. At the same time, a part of the contributions to the Takāful pool is earmarked for an investment fund that the operator’s shareholders manage on behalf of the policyholders. The latter are joint investors with the insurance company, and they share in the investment pool’s profits, in addition to benefiting from any cash surplus or dividends.

valori mobiliari

Transferable and negotiable securities issued by public bodies or private companies, which represent interest-bearing cash liabilities (return in a form of fixed payments) and interest-bearing shares invested in companies (variable returns), respectively. Since the entry into force of the Law on Finance, in 1998, valori mobiliari are called financial instruments and encompass bonds, shares of mutual funds, warrants, options, futures, swaps, securities traded in the money market, and others.

versamento in conto capitale

Contribution to the equity capital of a company, through a special-purpose reserve, with no obligation to repay.


The compulsory charity due from every Muslim on his/her net worth, as a part of his/her religious obligations, mainly for the benefit of the poor and the needy. It is a duty on every adult Muslim who owns more than a certain threshold of wealth.


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Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Sabrina Iannazzone
    • 1
  1. 1.Relazioni e Istituzioni dell’Asia e dell’AfricaUniversità degli Studi di Napoli “L’Orientale”NaplesItaly

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