Islamic Finance was a growing sector in the UK before the 2008 credit crunch shook the banking industry. Firms had begun to respond to client demand, recruiting experts in Sharia law and putting in place support networks. Now economies are holding back.
The Big Four and top mid-tier firms all have experts that are waiting to engage with clients on the topic, but it is not clear how much business this generates. People with an interest include those searching to invest in Islamic markets and those hoping to attract finance from cash-rich Sharia-observing countries.
In order to equivalate the growing demand from UK Muslims for a suitable retirement vehicle, Pointon York has launched a range of Shari’ah-compliant Self-Invested Personal Pensions (SIPPs).
Sultan Choudhury, Commercial Director, stated that people are attentive to the risks of not putting enough aside in pensions for their retirement.
The four Shari’ah-compliant SIPP products that Pointon York will offer are:
- e-SIPP. A low cost SIPP which can be easily managed online
- Single Investment SIPP. A straightforward SIPP for clients wishing to invest in a single asset
- Individual SIPP. A fully flexible SIPP allowing an extensive range of investments
- Corporate SIPP. Suitable for employers, it has three tiers providing flexibility. It is made up of the e-SIPP, the Single Investment SIPP and the Individual SIPP.
NEST Corporation has choosen HSBC Life Amanah Pension Fund for its Sharia Fund. NEST is a simple and low-cost UK pension scheme designed to give its members an easy way of building up their retirement pot. It also makes it easy for employers to meet their new workplace pension duties that will start to be introduced from 2012.
Stuart White, HSBC Global Asset Management (UK) Institutional Director, pointed out that this pension scheme could transform UK's pension industry.
Bank of London and The Middle East (BLME) stated that that they will launch a Light Industrial Building Fund (LIBF). This fund is a Sharia'a compliant UK real estate fund which invests in sustainable property assets.
The five core areas that set the foundations for BLME's competitive offering are Private Banking, Asset Management, Corporate Advisory, Corporate Banking and Markets Division.
Bank of London and The Middle East (BLME) has received a licence from the Central Bank of Bahrain (CBB) to open its regional office in the Kingdom.
LME provides a wide range of services and advice to businesses and individuals, with a strong focus on Europe, the Mena region, as well as the US.
The opening of the Bahrain office, BLME’s first overseas office in the Gulf region, reinforces its ambition to provide a bridge between the UK and the GCC to offer a range of investment opportunities to the global investment community.
The U.K., Europe’s largest market for Shariah-compliant financial products and services, canceled what would have been the first sale of Islamic bonds by a Western federal government as issues fell 15 percent in 2010.
Growth in Europe’s Islamic financial hub has been hampered by slowing economic expansion and the government’s attempt to plug a budget deficit.
Standard Chartered Plc and Bank Islam Malaysia Bhd. plan to offer Shariah-compliant derivatives in Malaysia that will allow investors to hedge against interest rates and commodity prices.
Bank Islam Malaysia, the country’s oldest Islamic lender, will offer swaps that allow two parties to exchange different forms of payments from an underlying asset. Standard Chartered, the U.K. bank that earns most of its profit from emerging markets, will begin selling contracts in the first quarter that provide protection from fluctuations in the cost of items such as rice and oil.
The Islamic Bank of Britain (IBB) has appointed Investment management platform provider Praemium to launch the UK’s only Sharia compliant retail discretionary portfolio service.
IBB stated Praemium’s discretionary portfolio service would give investors the chance to set up investments through its independent financial advisers.
Getting Islamic finance to become more mainstream needs a significant change to take place in the industry.
During the three-day event at the Gulf Hotel in Manama, delegates heard of the challenges facing the proliferation of Islamic finance products.
Shebab Marzban, product development officer for Egypt-based Ideal Ratings, instigated the discussion when he warned that many Western fund managers fail to carry out correct due diligence on Islamic finance products.
The transaction of Coxlease School valued at Pounds 17.5m ($28m). Tadhamon Capital advised on the transaction and acted as an arranger of the financing.
An Islamic trade body has been set up in the UK to promote Islamic finance and to campaign for a sterling-based Sharia bond.
The group consists of bankers, accountants, lawyers, and educational bodies that want to lobby the government to launch a Sukuk (Islamic bond) to enable the UK's five Islamic banks to get funds, based on Sharia principles, that would allow them to widen their pool of lending.
There were more business transactions in the past six months than they where achieved in the previous three years.
Business is booming not only in the UK and Europe but in new markets in Africa and in republics of the former Soviet Union in Eastern Europe.
The UK unit of Qatar Islamic Bank (QIB) has discovered a new strategy for small to medium-sized British companies with limited access to conventional sources of credit.
QIB (UK) has formed a partnership with alternative asset manager Eden Rock Capital Management to lend to UK companies in the Eden Rock Direct Lending Fund.
National Employment Savings Trust (Nest), UK considers to create a fund based sharia compliant solution, according to the CIO of the firm, Mark Fawcett along with different other mandates, such as: high risk/return, low risk/return and socially/ethically responsible.
North east company International Innovative Technologies (IIT), UK, issued a Sukuk. The 4-year, USD 10 mn musharaka sukuk – small by international capital markets standards – was placed privately with Millennium Private Equity and regulated by Dubai Financial Services Authority.
HSBC Amanah, the Islamic banking window of banking giant HSBC, is planning to launch its Islamic banking services in full scale in Bangladesh, a visiting top official of HSBC said Tuesday.
With the re-launch, HSBC Amanah in Bangladesh will be the largest presence in South East Asia, the deputy CEO said. Currently HSBC Amanah is operating in the UK, Malaysia, Middle East countries, Indonesia and other countries.
HSBC Amanah products are rigorously audited and approved by HSBC central Shariah committee.
Customers who are eager to be Sharia compliant are flocking to Islamic banks. Yet as Islamic lending boasts that it charges no interest, crunching the numbers churns out something of a surprise. Some Islamic mortgages charge more than already high interest-based traditional mortgages. You could even argue that an Islamic mortgage is, in some cases, so expensive it is akin to usury. And the terms are often less favourable.
Take the current murabaha rates in Syria and Lebanon. Murabaha is an Islamic equivalent to a mortgage or car loan. Instead of lending the customer money and charging interest, the bank purchases the asset and resells it for a profit to the customer. This profit is the murabaha rate.
Unlike, say, in the UK, there are no regulatory laws in Syria that require Islamic banks to quote their product in a way that is equivalent to an interest-based traditional mortgage to allow comparison shopping. The only way the average customer can convert murabaha to interest-based is with the help of a financial calculator and a professional.
This latest transaction completed in collaboration with GSH Kuwait, follows the acquisition of two earlier student accommodation properties in Loughborough and Liverpool last April, and brings the total value of Gatehouse Bank’s real estate portfolio in excess of £150 million.
The property has been purchased at a net initial yield of 6.73%, and will deliver an average cash yield of 9.3% per annum, with the university guaranteeing the term time rent and the developer, Berkeley Homes plc guaranteeing the summer vacation rent for the first five years.
The property, developed by Berkeley Homes, is subject to a Nominations Agreement with the Oxford Brookes University. The UK’s largest operator of privately managed student accommodation, CRM, will provide day to day management.
Corporate sukuks by UK organisations are expected in the coming few months following the recent launching of the first corporate sukuk out of United Kingdom by Gateshead-based International Innovative Technologies, or IIT.
A major GCC-based sukuk arranger, which is reportedly working on a corporate sukuk issuance for a UK healthcare company for the last year, hopes to launch the issuance in September. A London-based Islamic bank is also working on a sukuk issuance for a UK client which is near to being finalised. Tom Wilkinson, chairman of IIT, is confident that there is potential for other UK companies to access Islamic finance including sukuk as an alternative source of funding.
The sukuk issue was placed privately with Millennium Private Equity Ltd, leading private equity firm based in the Dubai International Financial Centre and regulated by the Dubai Financial Services Authority. The sukuk is essentially a convertible sukuk, whereby Millennium Private Equity Ltd can convert the sukuk into equity.
On 21st of September this year the meeting took place between Dr. Muhammad Nedal Alchaar Secretary general of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), and the Russian association of experts in Islamic financing .
On the meeting the experts exchanged their opinions concerning prospects of development of Islamic financial institutions and products in Russia, application of AAOIFI standards in the field of accounting, audit and norms of Shariah, and also actual world tendencies of the young industry.
Doctor Alchaar has informed that now the AAOIFI members consist of 220 Islamic financial institutions from 46 countries of the world and informed about the basic aspects and complexities of development of the Islamic finance in separate countries, in particular, in the UK, France and the USA.