Amjid Ali tells a story about when he was setting up the UK operations of HSBC Amanah, HSBC’s Islamic bank, in 2003. Mr Ali, now a senior manager at the global Amanah business, said: “I had a young, white, Christian man working with me. His surname was Bacon, which wasn’t ideal, but he embedded himself in the community so well that he became known as Mr Halal Bacon.”
His point was that although Islamic, or Sharia-compliant, finance was designed to enable Muslims to buy financial products that comply with the tenets of their religon, it is no longer a niche business. “There’s no need to be Muslim to work here or to buy the products,” Mr Ali said.
The global Islamic finance market is growing at 15 per cent a year and is expected to be worth $1,000 billion by 2010. In the UK it has grown to more than £500 million. A recent Mintel report said that 400,000 Muslims in Britain held Islamic products.
Moreover, although the official estimate of the Muslim population in the UK is two million, it is likely to be closer to three million, which means that there is a huge potential market.
Non Muslim Britons are getting a taste for Sharia-compliant products. Steven Amos, head of marketing at the Islamic Bank of Britain, said: “We’ve got nonMuslim customers, including some really famous names, because they like the ethical standpoint we take.”
The Islamic Bank opened in 2004 and is listed on AIM. Last year its customer base shot up by 38 per cent to 42,000, while deposits grew 61 per cent to £135 million and assets went up 51 per cent to £15.8 million. Muslim demographics in Britain offer the potential for even greater growth.
About 19 per cent of Muslims are self-employed, compared to 13 per cent of adults as a whole, which brings opportunities for the sale of commercial loans and mortgages. The Muslim population is also young, with 34 per cent aged under 16, which increases the potential for the sale of childrens’ bonds, student accounts and family protection products. Muslims in the UK have a combined spending power of £21 billion and save about £1 billion a year.
But there are barriers to developing the sector. Unemployment rates in the Muslim community are three times higher than the national average and a higher proportion of Muslims are in lower-paid occupations than for the population as a whole, Mintel said.
In addition, not all Islamic products appeal to all Muslims. HSBC Amanah, with Amaar, the Bank of Ireland’s commercial mortgage business, and Lloyds TSB’s Islamic offerings, are known as Islamic windows. Some orthodox individuals might shy away from buying from the windows because the banks cannot guarantee that their funding, which they receive from the bank group, is Sharia-compliant. The Islamic Bank is entirely compliant because it funds all its lending from its deposit base and does not borrow in the interbank market.
Mr Ali admits that this is an issue, but said that HSBC was chipping away at the market, aiming at more laissez faire Muslims first. He said that the banking sector had to work to win the trust of Muslims, who fear that they will be penalised with higher charges. “We’re still very much in the introductory phase,” he said. “There’s a much wider opportunity out there but it’s more difficult to penetrate. We recognise that we need to be more proactive in terms of ‘above the line’ marketing.”
There has been a boom in Islamic finance courses in Britain to cope with the demand for staff. The Securities and Investment Institute (SII) has established a qualification and the Cass Business School offers a degree in Islamic finance. Zaher Barakat, who teaches Islamic banking and finance at Cass, said that take up of the course was strong.
“Some students are Muslim, but as a financial innovation, the field is led at the moment mainly by nonMuslim people,” Mr Barakat said. “There is a difference between the offering of financial services and the actual consumption of them.”
Yes to trade, no to usury
— The Koran tells Muslims that “God has permitted trade and forbidden usury”. Making money from money is not allowed, which rules out interest charges. Gambling is also forbidden, which means that any activity in which one person gains at another person’s expense, such as insurance, forward forex trading and share options, are not permitted. Investments cannot be linked to any businesses seen as unethical, including alcohol and tobacco.
Source: Times online
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