Islamic banking makes British debut
The first bank in Britain to operate on Islamic principles, including interest-free loans, has opened.
The Islamic Bank of Britain (IBB) saw a steady stream of customers on Wednesday as it opened its doors in Edgware Road, the heart of London’s Arab quarter.
Islam’s Sharia law imposes a series of restrictions on banks, including a ban on charging interest for loans and prohibiting clients’ money from being invested in activities linked to alcohol, tobacco and pornography.
To deal with the no-interest rule, the IBB will itself buy the assets sought by clients and then sell them back at a fixed price, via monthly payments.
“We charge a profit for the services which we provide, we do not charge interest,” said the bank’s director of operations, Michael Hanlon.
‘No money for money’
“We do not trade money for money. We are actually involved in the physical supply of goods and services to customers,” he said.
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“We charge a profit for the services which we provide, we do not charge interest” Michael Hanlon, |
Currently, savings accounts are the only service on offer at the bank.
Mortgages are due to be available soon, and online banking will be offered from next year, according to the bank, which has posted Arabic-language details of its products in the windows to attract potential customers.
Opening hours are identical to a conventional bank, with the exception of Fridays, when the bank closes between 1pm and 3pm to allow its employees to attend prayers at the mosque.
“The biggest issue obviously is the interest rate,” said one Moroccan customer.
“We’ve always been waiting for these opportunities to have an account in a bank where you can get profits which are allowed in our religion,” he said.
First of its kind
The IBB was granted formal approval to operate by the Financial Services Authority last month, and is the first bank in Europe to specifically address the needs of Muslims, of whom there are 1.8 million in Britain alone.
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Other institutions have begun |
It is starting out with a capital of £14 million ($25.2 million) and plans to raise another £40 million via a stock market float.
“The capital that we have and the capital that we’ll be raising is more than sufficient to establish the bank,” said Hanlon.
The IBB is being supported by a group of investors based both in the Middle East and Britain, including some major financial institutions.
Its president is Abd Al-Rahman Abd Al-Malik, formerly head of the Abu Dhabi Islamic Bank, while other top managers come from institutions including Jordan International Bank and British-based Barclays.
About 150 Islamic financial institutions operate in 40 countries, but are still far and few between in western countries.