The IBB will allow 1.8 million British Muslims access to banking strictly in line with Shari`ah

LONDON, August 9 (IslamOnline.net & News Agencies) -  Britain's financial services watchdog gave the go-ahead for the first Islamic bank in Britain to open its doors.

The Financial Services Authority's (FSA) decision means that the Islamic Bank of Britain (IBB) will be able to open its first branch in London next month, offering its clients financial products respecting Shari`ah (Islamic law), Britain’s Press Association reported Monday, August 9.

Its headquarters will be in Birmingham, England's second city. It will open its first branch in Edgware Road, London, in September, followed by further branches in Birmingham and Leicester within a month.

By November it hopes to operate nationally through telephone and postal banking.

Interest-Free

The IBB will allow 1.8 million British Muslims access to banking strictly in line with Shari`ah.

“As Islamic banking operates without the use of interest, the products that we offer our customers are structured in a different way to those in conventional banks,” explained IBB Managing Director Michael Hanlon.

To deal with the no-interest payment rule, the IBB will itself buy the assets sought by its clients then sell them back at a fixed price via monthly payments.

For example, if someone wants to buy a computer, the bank will buy the computer and then sell it on to the customer at a fixed price, leasing it to them or charging a rental fee until the item is fully paid for.

It will also offer a range of Shari`ah compliant saving products, as well as current accounts with debit cards and consumer financing agreements.

It also plans to introduce a mortgage product by the end of the year, subject to regulatory approval, and internet banking during early 2005.

To ensure it is operating in a Shari`ah compliant way, a group of Islamic scholars will sit on a supervisory committee which must approve the bank's services, investments and activities.

Watershed

Iqbal Asaria, president of the Muslim Council of Great Britain's economic committee, hailed the news as “a watershed event in the history of Islamic finance in the UK”.

“It marks the beginning of the launch of fully regulated Shari`ah - compliant products for the Muslim community,” Asaria told Agence France-Presse (AFP).

Although Islamic banking facilities have been available for several years, they have been from foreign and British banks or joint ventures.

HSBC banking group has become the fist high street bank in Britain to offer mortgages and current accounts in accordance with Shari`ah.

Under Shari`ah, the interest on bank accounts is unlawful or haram because such interest is an increase of money made without effort or trade.

Islam also prohibits depositing one’s wealth and taking specified increase without the risk of either loss or profit making.

Therefore, the type of investment allowed is where a person deposits money in an account and shares both the risk of making profit or losing.

Islamic law further forbids Muslims from receiving or paying interest on loans.

This, for instance, barred Muslims in Britain from buying houses unless they saved the entire purchase price in advance.