Around the world there is proven demand among Muslims for a system of finance that enables them to use their wealth in a manner consistent with their religious beliefs.
However, the outlook for the new Islamic Bank of Britain is not as rosy as such a calculation would suggest. Conventional banks are not about to let it monopolise the UK's 1.8m Muslims. Citibank, HSBC and UBS are just three of the large banks that have launched products aimed specifically at Muslims. Experts say the Islamic Bank of Britain will also have to deal with the problems that Islamic banks confront around the world, rooted in the challenge of offering services similar to conventional banking but which conform to Islamic law.
The situation is complicated by disagreements between financial experts, says Richard de Belder of law firm Denton Wilde Sapte. “All Islamic financial institutions offer the same basic products, but the problem is that each institution will have a group of Islamic scholars on the Sharia board that must approve each new product structure. “Not only will each board often take a different view, but there are also four different schools of thought in Islam, and that prevents a consensus from building.”
Speedy development of new products is also hindered by the fact that there are only about a dozen specialist Islamic scholars available to advise the world's banks on each new product. Laurence Oliver of Dawnay Day Global Asset Management London says: “Most companies will try and get hold of one or two of them [the scholars] when offering a new product or transaction. There are other scholars, but you need some of the leading ones to make a product commercially viable.”
Islamic banking not only differs between banks, but also between regions, with Malaysia considered to have a more liberal regime than the Middle East. It was in Malaysia that HSBC first introduced an Islamic bond, or “sukuk”. With western banks pushing hard to develop new Sharia-compliant products, Warren Edwardes, chief executive of Delphi Risk Management, says special purpose Islamic banks will face a challenge attracting clients from high-street names.
