How Islamic Bank of Britain has Pioneered Islamic Finance
Since the launch of its first branch on Edgware Road in September 2004, Islamic Bank of Britain has pioneered Islamic retail banking in the UK, continuing the trend in the UK in what is considered to be the fastest growing sector in the financial market.
The bank’s introduction of the UK’s first Sharia’a compliant deposit account at its launch was a significant event in Islamic finance and opened the market in the UK to retail Islamic products. Up until then, the range of Islamic finance products available had been limited to home purchase schemes and current accounts. In order to develop a full range of saving and financing products, Islamic Bank of Britain had to overcome significant barriers to developing products which were both Sharia’a compliant and FSA approved. The introduction of a ‘halal’ deposit account based on the principle of profit sharing was an important first step in the process and something that had been contemplated by major Islamic institutions but never achieved before. The launch also marked the first time that Britain’s 1.8 Million Muslims were able to take advantage of services from a stand alone UK bank that followed Islamic principles (Sharia’a law). One year on the bank has achieved an incredible amount, including the introduction of two ‘halal’ offerings which remain unique in the UK - the deposit accounts, as detailed above, and, more recently, an unsecured personal finance facility.
Michael Hanlon, managing director, comments:
“When we launched a year ago our aim was to make a wide range of Sharia’a compliant retail banking products and services available to the consumer. In our first year alone we have reached that goal and, in the process, have worked hard to smooth the way for what is a new financial concept to many in the UK. A key focus for us has been to work with UK authorities, like the FSA and the Treasury, in order to create a thriving Islamic financial services market which fits within the UK legal and regulatory framework.”
Key Developments in UK Islamic Finance
- August 2004 – FSA gives approval for the UK’s first Sharia’a compliant deposit taker and hence launched the first totally Islamic British Bank – Islamic Bank of Britain - attracting media interest from across the world. The bank is based on four key principles – Trust, Faith, Value and Convenience.
- 21st September 2004 – Islamic Bank of Britain opens its first branch on Edgware Road, London. This is the first branch from a stand alone UK Islamic bank. Islamic Bank of Britain is still the only stand alone Islamic bank in the UK. This coincides with the launch of the first Sharia’a compliant savings accounts by Islamic Bank of Britain.
- October 2004 – Islamic Bank of Britain starts trading on the Alternative Investment Market (AIM), raising £38.5m net through the offering and private placement of 160 million new ordinary shares.
- March 2005 - Changes in legislation relating to Islamic finance products are announced as part of the Budget, following discussions initiated by Islamic Bank of Britain. The Finance Act 2005 includes changes specifically related to the taxation of Islamic financial products with the aim of putting them on a level playing field with other comparable non-Islamic financial products. Discussions started by the bank led to the Treasury initiating a review of UK taxation relating to financial arrangements based on Sharia’a principles. Committees have been set up to continue to review Islamic products with a view to removing barriers to the introduction of further Islamic financial products in the future.
- March 2005 – Islamic Bank of Britain launches Direct Banking, marking the first time that Britain’s entire Muslim community have access to a range of Sharia’a compliant banking services from a stand alone UK Islamic bank. Access is currently via telephone and postal banking (to the Bank’s UK based customer service centre which is open from 8.00am to 8.00pm weekdays). Internet banking is due to launch early in 2006.
- June 2005 – Islamic Bank of Britain launches personal finance facility making it the only provider of ‘halal’ unsecured personal finance in the UK.
- June 2005 – Islamic Bank of Britain launches a new Masjid proposition marking the first time that Mosques and other religious organisations have been able to make a halal profit on cash deposits.
- Ongoing - Islamic Bank of Britain has opened five branches in the UK, bringing its services to local communities in London, Birmingham and Leicester. The bank takes a service based approach to banking. While staff have access to the latest technology, they also put a big emphasis on the relationship built with customers and the community. A further two branches are planned before the end of 2005. The bank has a growing customer base supported by the continued growth in distribution capability.
Overview of Products and Services from Islamic Bank of Britain
- Three types of savings accounts– Islamic Bank of Britain is the only British bank to offer Sharia’a compliant savings products.
- Current account including debit card (or cash card subject to status) and cheque book
- Direct banking service, using phone and post, with internet banking due to launch early 2006.
- Personal Finance offer – Islamic Bank of Britain is the only British bank to offer unsecured personal finance facility.
- Masjid account – Account aimed at Mosques and other religious organisations.
- New ‘halal’ business proposition which is aimed at small businesses.