UK Islamic mortgages set for growth after Qatari investment
Shareholders of Islamic Bank of Britain (IBB) yesterday approved a £20 million capital injection from founding shareholder Qatar International Islamic Bank (QIIB), which takes QIIB’s stake in the bank to over 80%
The additional capital will allow IBB to realise product development plans including the growth of its Islamic mortgage alternative, the Home Purchase Plan. IBB immediately released details of two new products to be launched as a result of the capital injection.
Coinciding with the Islamic holy month of Ramadhan, IBB will today launches a 3.99% fixed rental rate product until January 2012 and a variable rental rate product at 4.99%.
Established in 2004, IBB is the UK’s only stand-alone, Sharia compliant retail bank. IBB has grown its deposits, assets and customers every year and has customer deposits of over £186 million, customer financing at £46 million and nearly 50,000 customers in its 2009 financial statements.
Commenting on the investment, Sultan Choudhury, commercial director at IBB, said: “IBB already offers the largest range of Sharia compliant products and services in the UK. With a fresh injection of capital we are well placed to grow the business through our Home Purchase Plan products. The products will offer peace of mind for customers, both financially and spiritually, which is especially important in the holy month of Ramadhan.”
Sharia compliant banking operates without the use of interest and products are structured in a different way to those provided by conventional banks. Each monthly payment in the Home Purchase Plan consists of two elements:
The rent element is the amount the customer pays to the bank as rent on the bank’s share of the property. This is in accordance with an Ijara (Lease) agreement.
The acquisition element is the amount the customer pays to purchase a part of the bank’s share in the property. This is in accordance with a Diminishing Musharaka (partnership) agreement.
The rent element decreases as the bank’s share in the property decreases with each acquisition payment. Correspondingly, the customer’s equity in the property increases with every payment.
