Abstract:

Over the past decade, the transactional volume of Socially Responsible Investing (SRI) entities has increased in EU countries and in the US. One form of these SRI’s (Islamic Banking), has seen a drastic increase in EU countries (by over 50%) during the past two years (2010-2012), and the trend is suggested to continue. The current study captures the opportunities and threats facing the Islamic Banking (IB) industry in EU countries by introducing a taxonomy of the factors that control performance of these lending institutions. Then, the future of the IB industry in EU countries is discussed. More flexible regulation (on the part of standard setters) and more careful definition of risk factors (on the part of the banks) is crucial for the success of these banks in Europe.