The UK can be a world leader in Islamic finance

Amir Firdaus, CFO, Al Rayan Bank Islamic finance is reinforcing the UK’s position as a global financial hub, says Amir Firdaus, CFO of the UK’s oldest and largest Islamic bank, Al Rayan Bank.   The UK has a long-standing reputation as one of the world’s most important and innovative financial centres. The City of London is already the global leader for currency trading, fintech, cross-border banking, asset management and much more. It is also the leading centre for Islamic finance outside of the Muslim world, with assets of UK-based institutions that offer Islamic finance services totalling more than $5bn. In light of current political and economic uncertainty, this is certainly a position the UK can leverage, particularly when it comes to driving inward investment and securing trade opportunities in a post-Brexit world. In recent years, the UK has reinforced its position as the western hub for Islamic finance. Today, over 20 banks in the UK offer Islamic services, five of these banks are fully Sharia-compliant, including Al Rayan Bank. Al Rayan Bank currently provides Islamic financial products to over 85,000 customers in the UK.  The Bank is the largest provider of Islamic home finance in the country and was the first to introduce Islamic business banking to Britain. The Bank is also one of a handful of Islamic current account providers and offers the largest range of Sharia compliant savings products, including the country’s only cash ISAs.

Last year, Al Rayan Bank became the first bank in the world to issue a public Sterling Sukuk (Islamic bond) in a non-Muslim country.  The London-listed £250m securitisation was rated AAA by Standard & Poor’s (S&P) and Aaa by Moody’s Investors Service (Moody’s) and was significantly oversubscribed – reflecting the strong demand for Islamic financing instruments that exists in the market. But as well as strengthening its position amongst Muslim communities in the UK, the appeal of Islamic finance is growing with a wider audience. Over a third of Al Rayan Bank’s customers are currently believed to be non-Muslim, and in certain products categories the proportion of non-Muslim customers is far higher.  Indeed, we believe that over 80% of all fixed term deposit (FTD) customers are not of the Muslim faith. But while Al Rayan Bank has made great strides in raising awareness and understanding of Islamic finance in the UK, there’s more to be done to maintain engagement with non-Muslim audiences. With its underlying principles of equitable distribution for all, fair trading, judicious spending of wealth and the well-being of the community as a whole, Islamic finance presents an ethical banking alternative for anybody, not just for Muslims. Increasingly, customers want to know where their deposits are being invested and the ethical and responsible nature of Islamic banking presents a genuine alternative. Islamic banks can only invest in activities backed by a tangible asset, which means highly speculative investments are not permitted – this reassures a lot of people who have grown weary of the sometimes abstract nature of conventional banking. Likewise, the fact that investments can only be made in activities in keeping with the ethical values of Islam appeals to people of all faiths and none. Al Rayan Bank is committed to making Islamic banking products as widely available as possible. The Bank was the first Islamic bank in the UK to offer a home finance product designed to support first-time buyers. Islamic finance is evidently growing in appeal among Muslims and non-Muslims alike. As awareness and understanding of Islamic finance improves, it is incumbent on us to promote the opportunities that Islamic finance provides to new audiences. This will ultimately help to sustain growth in the sector and strengthen the UK’s position at the forefront of global finance.

---

Al Rayan Bank is the oldest and largest Islamic bank in the UK.  Founded in 2004, the bank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority and is a member of the FSCS. In 2019, Al Rayan Bank is celebrating its 15th anniversary. The bank currently serves more than 85,000 customers throughout the country. The Bank is the only Islamic bank in the UK to receive a public credit rating. Citing Al Rayan Bank’s sound asset risk profile, robust capitalisation and sufficient liquid resources as credit strengths, Moody’s assigns the bank baa2 baseline credit assessment (BCA), an a2 adjusted BCA, Aa3 long-term deposit ratings, as well as a Counterparty Risk Ratings (CRR) of Aa2/Prime-1 and Counterparty Risk Assessment of Aa2/Prime-1. Al Rayan Bank is an open and inclusive bank which welcomes customers of any faith. The Bank currently estimates that more than a quarter of its customers are not of the Muslim faith.  This is much higher in certain product groups. For example, over 80 per cent of all fixed term deposit customers are believed to be non-Muslim.