1 / 27

Islamic finance in the UK

Islamic finance in the UK. Presented by: Keith Leach Head of alburaq ABC International Bank plc. Presentation Summary. Introduction The Government’s approach Consumer banking products Takafol Commercial property finance The future. Introduction. ABC International Bank plc, London

vivian
Download Presentation

Islamic finance in the UK

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Islamic finance in the UK Presented by: Keith Leach Head of alburaq ABC International Bank plc

  2. Presentation Summary • Introduction • The Government’s approach • Consumer banking products • Takafol • Commercial property finance • The future

  3. Introduction • ABC International Bank plc, London • Subsidiary of the Arab Banking Corporation, Bahrain Islamic Asset Management Team, London alburaq Real estate finance and investment Leasing Structured finance • ABC Group includes ABC Islamic Bank, Bahrain

  4. Introduction • alburaq • Specialises in Islamic retail products in the UK • Home finance • Buy-to-let, • Non-UK residents • Self-cert, fixed and variable prices • Commercial property finance • Savings account (new) • Products available directly or through • Lloyds/TSB, Islamic Bank of Britain, IFA market

  5. Islamic finance in the UK • Strongly supported by the Government • To help the UK’s Muslim community • An ‘inclusive’ approach to help ensure that the Muslim community (and all ethnic/other minorities) do not suffer financial exclusion due to religious beliefs or for other cultural reasons • To promote ‘UK plc’ as a centre for Islamic finance • See London as a global hub for Islamic finance, certainly in the West

  6. Islamic finance in the UK • Islamic finance experts group • Hosted by the Treasury and meets 3 - 4 times a year, chaired by Economics minister (Ed Balls and now Kitty Ussher) • UK trade and investment (UKTI) • Supports UK business helping them trade internationally and encourages domestic investment

  7. Government support - action • 1997 Labour Government in power • 1999 Sir Eddie George - Working Group • 2003 Finance Act – Stamp Duty • 2005 Islamic Bank of Britain authorised • 2007 Treasury – IF Experts Group • 2007 FSA regulation of HPP’s • 2007 Review for UK Gov Sukuk issuance • 2008 Gov Sukuk announcement

  8. Islamic banks and windows • Albaraka (mortgages) 1980s • United Bank of Kuwait (AUB) (mortgages) 1996 • HSBC (mortgage, current a/c) 2003 • ABC International Bank (alburaq (mortgage) 2004 • Islamic Bank of Britain (retail banking) 2004 • Ansar Finance (community focused NFP) 2004 • RBS/Bank of Ireland (Commercial property) 2004 • EIIB (Investment Bank) 2005 • Lloyds TSB (current a/c) 2005 • Children’s Mutual (Child Trust Fund) 2005 • United National Bank (mortgages, Scotland) 2005 • BLME 2007 • EFH 2008 • Gatehouse plc 2008 • British Islamic Insurance Co (Takafol) 2008

  9. UK authorised Islamic financial institutions • Islamic Bank of Britain • European Islamic Investment Bank • Bank of London and the Middle East • European Finance House • Gatehouse plc • British Islamic Insurance Holdings

  10. Muslims in the UK • Increasing population now approaching 2 million • Ethnic origins • 43% Pakistani • 17% Bangladeshi • 9% Indian • 31% others • Census 2001 • 45% live in London and the South-East

  11. Muslims in the UK • Comparatively young population • Average age 28 • 9 in 10 under 65 • 34% under 16 years of age • Most interested • 2nd Generation • Born in the UK • Professional careers • Both male and female

  12. Muslims in the UK • 411,000 households (Census 2001) • 183,386 in rented accommodation • 73,034 Council • 41,329 other • 69,023 privately rented • 211,591 home owners • 74,891 outright • 133,912 mortgage • 2,788 shared ownership • 16,438 living rent free

  13. Muslims in the UK

  14. Government Support • Regulation and Tax • Legislation to allow Islamic products to compete on a level playing field • FA 2003, 2004, 2005, 2006, 2007 • Alternative finance return and profit share return economically equivalent to interest • Regulation of Islamic home finance (HPPs)

  15. HPP Regulation 2007 • Effective 6th April 2007 • Home Purchase Plans • Sympathetic disclosure documents • IDD, RFS, FIS • Few intermediaries authorised • Fewer offering an advice service • VAT

  16. Residential finance Financing techniques • Murabaha • Ijara • Diminishing Musharaka • Commodity Murabaha (Tawarruq)

  17. Savings options (not many) • Mudaraba and Wakala accounts • IBB • P&L accounts -Commodity Murabaha based • Alburaq • Protected Equity Linked Account • Based on Wakala principles pays a return based on the change in value of a basket of Sharaih compliant shares • Child Trust Fund • Collective Investment Schemes • HSBC and Scottish Widows Global Islamic Equity Funds

  18. Takafol • British Islamic Insurance Holdings • FSA authorised April 08 • Products to be launched end of the 2nd qtr • First products • Car Insurance • Property insurance • HSBC Amanah • Takafol property insurance

  19. Commercial Property Finance • Market • UK residents for business purposes • UK residents for investment purposes • Non-UK resident investors • Corporate or individual purchasers • Estimated 100,000 Muslim owned SMEs in the UK

  20. Financing Models • Murabaha • Ijara • Commodity Muarabaha (Tawarruq) • Diminishing Musharaka • Parallel Istisna (development finance)

  21. Government Support • 2006 – SDLT relief extended to corporate entities • 2007 – HMRC guidance on tax treatment of all financing techniques covering • Capital allowances • VAT • CGT

  22. Issues for financiers • Property usage screening • Must be permissible activities • Potential contamination liabilities • Contaminated land • Asbestos • Other 3rd party liabilities as owners • Personal injury • Negligence • VAT • Payable on purchase price • Payable on rental payments • FRI leases • Owner’s obligation to insure • Owner’s obligation to maintain

  23. Future • Ongoing tweaking of laws and regulations • UK Government Sukuk • Islamic funding for Government PFI projects • Securitisation of UK Islamic mortgage portfolios • More Islamic finance companies in London

  24. Islamic Finance in the UK Presented by: Keith Leach Head of alburaq ABC International Bank plc 23rd October 2007

More Related