Islamic finance has right idea

Nov 20 2008 By Fiona Thomson

Britain’s commercial landscape has changed dramatically over the past year or so, but it may have been considerably worse were it not for the growing influence of Islamic-style finance.

The evidence is all around us: a few billion here to refinance Barclays Bank courtesy of the Qataris; a couple of hundred million in Abu Dhabi investment to buy control of Manchester City FC; and pretty soon – to pinch a quote from Ronald Reagan – you’re talking “big money”.

The fact is that Middle Eastern cash has been around for a long time in the UK’s commercial property world, and now it’s making its presence felt in other sectors, too.

Islamic-style finance is here to stay, and we should all be glad of that since it appears to be just about the only game in town at present.

The sooner the property sector understands a little more about this form of religion-based lending, the better it will be for us all.

Most of the much-needed investment is coming from the fabulously rich sovereign wealth funds of the Middle East.

Although these funds may not have escaped the effects of the crunch, they are still rich beyond most people’s comprehension.

UK property has traditionally been something of a safe haven for Middle Eastern investors who have been attracted by its combination of relative reliability and reasonable returns.

Now they are returning to discover that there are plenty of bargains to be had.

It appears that while so-called vulture funds have been holding back – sitting on their capital until they can call the bottom of the market – the sovereign funds have been taking a pragmatic approach, snapping up value. I am sure they will remain long-term players in the UK.

Their willingness to continue investing provides some buoyancy to a sector that would otherwise be in much more serious straits, and demonstrates the importance of Islamic-style finance and the mind-set behind it.

To support this, NatWest has recently launched Islamic Sharia commercial property mortgages aimed specifically at the diverse Birmingham market, while HSBC has been offering a wide range of Islamic finance products for some time.

Birmingham, with its multicultural population and strong ties with emerging markets in India and China, is ideally placed to take advantage of this new world order.

To that end my own firm has placed diversity high on its agenda and is working closely with groups such as the Institute of Asian Businesses (IAB) in Birmingham

The aim must be to ensure that Birmingham’s professional services – property in particular – are aligned to emerging economies and have a proper understanding of Sharia finance.

n Fiona Thomson is from Clarke Willmott’s Birmingham office.