Islamic Bank of Britain host UK’s first ‘Islamic Finance Question Time’

Islamic Bank of Britain plc (IBB) held a question and answer session hosted by the Bank’s Shari’a scholars, ‘Islamic Finance Question Time’ on April 23. The aim of the event was to “demystify Islamic finance and provide an insight into how it offers a faith-based alternative to conventional finance and banking,” according IBB spokesperson.

IBB’s Sharia Supervisory Committee (SSC) consists of esteemed Shari’a scholars, Sheikh Dr Abdul Sattar Abu Ghuddah, Sheikh Nizam Muhammed Saleh Yaqoobi and Mufti Abdul Qadir Barkatulla.

Commenting on the event, Chairman of the IBB SSC, Sheikh Abu Ghuddah, said, “Islamic finance is as old as the religion of Islam itself. However, there is still a lot of misunderstanding around how it works and the need for Muslims to manage their finances in Shari’a compliant manner. The IBB SSC hopes the Islamic Finance Question Time event has shed some light on the matter and gone some way to encouraging the further take-up of Shari’a Finance amongst the Muslim community.”

Senior Manager, Sharia Compliance at IBB, Samir Alamad, who works closely with the IBB SSC on a day to day basis, also commented, “The feedback from attendees of Islamic Finance Question Time has been very positive. The public welcomed the opportunity to engage with the IBB SSC so openly. The event is the first time a UK Islamic bank has given open access to its SSC, and this reflects the open and transparent way the Bank works with its customers.”

Over 150 guests attended the event, held in central London for a debate lasting over 1.5 hours. Of the questions, the following generated a lively and informed discussion amongst the panel and their guests:

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UK Experts Eye Islamic Finance Solution

A decision by the UK government to put on hold earlier plans for the first Islamic sovereign bond from a western country was criticized as a setback for the initiative that could have provided more security to a shaking economy.

“It would certainly help the UK market if the government decided to go ahead with a benchmark sukuk,” Farmida Bi, partner at Norton Rose, the law firm, told the Financial Times.

“It could galvanize the market and would lead to more interest in Islamic finance in London and [continental] Europe.”

Affected by a financial crisis, the UK put the plans to issue the Islamic instrument on hold which would have been the first Islamic bond to be issued by a western government.

The government cited fears that a new instrument might struggle to attract demand in difficult market conditions that have been made worse by the troubles in the eurozone.

Yet, London still remains the main arena outside the Muslim world for Islamic finance.

In 2006, Britain’s fifth-biggest bank, Lloyds TSB, began to roll-out its Islamic financial services across the country.

The UK is the only country in the European Union to have Islamic banks. It is also developing its takaful market for Islamic insurance.

The UK also has a strong foothold in developing products such as commodity murabaha – Islam’s version of interbank short-term lending and syndicated loans.

Moreover, London has established the first secondary market in sukuk outside the Islamic world to help Islamic investors who seek to buy property and assets in the UK in a way that fits in with their religion, which bans earning interest, speculating or risk-taking.

London is also advanced in Islamic retail services, with institutions offering a range of Islamic banking products, such as mortgages and car loans.

The Islamic Bank of Britain, granted a license in August 2004, became the first Islamic bank in the UK and has continued to attract customers for mortgages.

Enhance Market

Admitting that the government made huge efforts to facilitate Islamic finance in the UK, there is a feeling among many bankers that the government must launch a sovereign sukuk to help the market move to the next stage.

“I think it has been a mistake by this government not to revive the idea of an Islamic government bond,” a banker at a big City institution told Financial Times.

“They worry about price and demand, but the UK gilts market is a haven.

“We are confident there would be strong demand for this product, as it is Islamic and would be denominated in sterling, which is what investors want, as there are so many problems in the eurozone.”

Despite the recent decision to hold the new instrument, the Islamic finance was gaining popularity in UK better than other European countries.

For example, though France has around 7 million Muslims, compared with UK 2 million Muslims, progress in Islamic finance in France was stalled due to problems over banning the face veil and burka in public places which put off investors.

Starting almost three decades ago, the Islamic banking industry has made substantial growth and attracted the attention of investors and bankers across the world.

A long list of international institutions, including Citigroup, HSBC and Deutsche Bank, are going into the Islamic banking business.

Currently, there are nearly 300 Islamic banks and financial institutions worldwide whose assets are predicted to grow to $1 trillion by 2013.

Islam forbids Muslims from usury, receiving or paying interest on loans.

Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.

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.

The Shari`ah-compliant system is now being practiced in 50 countries worldwide, making it one of the fastest growing sectors in the global financial industry.

source : onislam net