Lloyds launches Islamic banking products
The products have been specially designed for Britain’s Muslim community, whose religion does not allow them to earn interest on their savings.
It is the second major high street bank, after HSBC, to offer Islamic banking products, which are also available from the Islamic Bank of Britain and the West Bromwich building society.
Until recently, Muslims have either had the choice of opting out of the mainstream banking system altogether or just resorting to conventional interest-based accounts.
Shariah law forbids the charging or receiving of interest (riba), making not only bank accounts off limits for many, but mortgages and investments as well.
Lloyds TSB is initially launching two Shariah compliant products – an Islamic current account and an Islamic mortgage – and plans to launch a student account later in the year.
The products have been developed in consultation with a board of Islamic scholars to ensure they are complaint with all aspects of the law.
Paul Sherrin, head of Islamic Financial Services at Lloyds TSB, said: “Having spoken to Muslims across the country we know that more than three-quarters want current accounts and mortgages that fit with their faith.
“By making these products available nationwide we’re bringing Islamic banking into the mainstream and we’re giving the Muslim community access to financial services that meet their needs without compromising their religion.”
The current account comes with a debit card, but it does not offer interest, have an overdraft facility, charge a fee or require a minimum balance.
Funds held by Lloyds TSB for the Islamic current accounts will only be invested in industries that are permitted under Islamic law, which excludes alcohol, gambling and tobacco, among others.
Under the Islamic mortgage, the bank will buy the home on behalf of the customer – instead of lending money for a property – contributing up to 90 per cent of the purchase price. The customer will pay the remaining amount upfront, and repay the outstanding balance over an agreed term, along with a rental payment.
The products provide Muslims with access to Lloyds TSB’s network of 2,000 branches and 4,000 ATMs, along with its internet and telephone banking services
source : Myfinance.co.uk