On a recent Friday afternoon, the Islamic Bank of Britain (IBB) branch in West London was bustling with a large number of customers, including non-Muslims. At a time many conventional banks have gone bust in the credit crunch and financial crisis, the IBB is reporting a growth of 5 percent in customer numbers and 13 percent in customer financing.
The reason is that the bank “has been better protected from the credit crunch affecting mainstream banks,” Sultan Choudhury, the commercial director at the IBB, told IslamOnline.net.
A financial crisis swept the US last month after the collapse of Lehman Brothers, the fourth-largest investment bank, and the financial woes of a number of Wall Street giants.
This triggered a domino effect across the world leaving conventional banks, lending each other on the money markets, short of credit.
Western government have since pumped billions of dollars into their troubled banks to keep credit flowing and prevent a complete financial meltdown.
The British government recently unveiled a massive the £37bn bank bailout of taxpayer’ funds to rescue Lloyds TSB, HBOS and Royal Bank of Scotland from liquidity shortage.
Choudhury said the IBB does not take interest-based loans from other banks, and has high quality, asset-based investments.
“That means that the bank avoided the instability the other high street banks have suffered,” he explained.
Islam forbids Muslims from usury, receiving or paying interest (known as Riba) on loans.
Transactions by Islamic banks must be backed by real assets — not shady repackaged subprime mortgages.
Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.
Investors have a right to know how their funds are being used, and the sector is overseen by dedicated supervisory boards as well as the usual national regulatory authorities.
Choudhury cited a rise in the number of IBB’s customers “looking for a safer option for their money.”
Abul Fozoll, the manager of the IBB Shepherds Bush branch, says Muslims make up the majority of customers.
Most of the bank’s branches are located in areas with a large Muslim population.
However, the bank officials say more branches are to open in other areas as its profits and customer numbers are picking up.
The IBB,UK’s first stand-alone Islamic bank, is reporting an increase in the number of non-Muslim customers.
Bank officials said the numbers are growing because Islamic banking offers a “safer option” thanks to its operations which are based on no-interest schemes.
However, they refused to give any breakdown of Muslim and non-Muslim customers.
Non-Muslim customers are drawn to the IBB because High Street banks offer less opportunities for house mortgages during the crunch.
Recent figures from the Council of Mortgage lenders have shown a continued slowdown in mortgage approvals and advances.
Just 59,000 residential properties, worth more than £40,000, were sold during September, the lowest level since HM Revenue & Customs began issuing figures in this format in 2005.
The number was well down on the 126,000 homes sold during September last year.
The IBB has stepped in, launching new home purchasing schemes based on the Islamic financing principles of Ijara (leasing) and Diminishing Musharaka (reducing partnership).
Along with financial advantages, Chodhury said that a growing number of non-Muslims is drawn to his bank’s genuinely ethical offering.
“It is ethical, as investing in businesses that are considered unlawful is prohibited. That includes companies that deal in gambling, pornography, tobacco and other commodities contrary to Islamic values
source : iol