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Islamic financial products become mainstream in UK
13 April 2007
This Easter Muslims taking out Islamic mortgages gained formal protection from the Financial Services Authority when new regulations came into effect on the 6th of April. alburaq, the leading Shariah compliant Islamic mortgage provider, welcomes the move as Islamic financial products continue to become more mainstream in the UK.
‘As a result of the legislation Muslim homeowners are now afforded the same regulatory protection as every other mortgage holder in the UK, giving them both peace of mind when taking out an Islamic mortgage and confidence that these products are here to stay,’ said Keith Leach, Head of alburaq at ABC International Bank plc. ‘This is a highly positive new step and illustrates the growth of the Islamic mortgage market.’
‘It is also very interesting to see the approach the FSA has taken to regulating these products. They have been highly aware of the sensitive issues surrounding why people would be motivated to take out an Islamic mortgage and the regulations they have introduced reflect this. This has not been as simple as applying current mortgage regulations to these products. The FSA have consulted providers and Muslim consumers to ensure the regulatory requirements are appropriate to these products. As an example, all providers are now obliged in their Initial Disclosure Document to state to the consumer in a prescribed format who the provider has used for its Shariah advice. This has arisen directly as a result of the FSA’s consultations with consumers and they should be congratulated on implementing regulation is such an appropriate way,’ comments Keith Leach.
As a result of the new FSA regulations alburaq is now the only widely available product provider able to accept introductions and referrals from financial intermediaries.
alburaq predicts the total Muslim market will grow to over £1 billion by 2009. alburaq launched home and buy-to-let finance for the UK’s two million Muslims towards the end of 2004, which offered the Muslim community an ability to own and invest in property. The volume of Islamic mortgage business is only a small percentage of the total mortgage figure in the UK, but based on current trends alburaq are predicting significant growth over the next 2 years.
Shariah law prohibits the practice of earning money from money, so the payment of interest (known as Riba) is not allowed. Shariah compliant finance products operate without earning - or charging - interest, enabling Muslims to bank without compromising their principles.
alburaq partnered with Bristol & West to launch the home and buy-to-let finance so they could combine their expertise in Islamic banking with Bristol & West’s experience in the UK mortgage market.
‘This is a real step forward for the industry and recognition of the growing market in Muslim finance in the UK,’ said Alison Pallett from Bristol & West. ‘We are delighted that this new legislation mirrors our already high standards and we see our partnership with alburaq growing stronger and stronger.’
