PARIS, April 16, 2006 (AFP) - French banks in the Middle East, anxious to win business from wealthy Muslim investors, are adapting their practices to conform to financial precepts required by Islam.

French banks BNP Paribas, Calyon and Société Générale have lately raised their profile in Middle Eastern Islamic finance, a sector in which bank assets are worth between US $200 and 400 billion (EUR 165-330 billion), according to ratings agency Standard and Poor's.

Financial operations under Islam are based on several cardinal principles: the proscription of interest payments, a requirement that transactions be based on tangible assets and a ban on dealings in such domains as arms, alcohol, pork products and pornography.

Islamic banking clients pay no interest on the funds they borrow but are charged certain service fees.

In cases where the amounts involved are considerable, the bank will loan money to an investor while at the same time buying an asset that the investor agrees to buy back at a higher price, the difference representing in effect an interest payment.

BNP Paribas, which has been active in the Middle East since the early 1970s, established an Islamic banking division in the Gulf state of Bahrain in 2003 in the face of "strong demand" from clients in the region, said Jacques Tripon, BNP's head of corporate banking in the Middle East.

Calyon, the investment banking arm of Crédit Agricole, opened an Islamic banking unit in 2004. The two groups have boards of sharia scholars, or experts in Islamic law, that monitor products and operations offered by the banks.

Another French bank, Natexis Banque Populaire, last week announced that it had taken part in financing a new Kuwaiti airline in conjunction with Kuwait Finance House, the world's second largest Islamic bank.

In September, BNP Paribas managed a one-billion-dollar transaction linking Abu Dhabi, part of the United Arab Emirates, and oil firms Total and Occidental Petroleum.

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