Islamic Bank expected to ride out Dubai troubles
Backers of the Birmingham-based Islamic Bank of Britain have insisted Islamic finance is still the way forward for investors, even after the sector was rocked by the massive failure in Dubai.
The Edgbaston bank officially celebrated its fifth birthday at the start of the Eid festival – the same day Dubai shocked the financial world when it announced its government-controlled investment vehicle would need a six-month moratorium on debts worth more than £35 billion.
The previously buoyant world of Islamic finance was dealt a blow by the revelation that Dubai World was unlikely to be able to repay a £2.1bn Islamic bond, or sukuk, that was set to mature on December 14.
Experts said it would have a huge impact on confidence in the sector, even though the root of the trouble was not due to Islamic finance rules.
There has been a sustained campaign to promote IBB and Islamic finance in Birmingham generally on the world stage as a growth industry. Birmingham Forward will be leading a trade delegation to the Islamic Finance Conference in Bahrain this weekend to talk up the city.
In October, an adviser at UK Trade & Investment said Birmingham had broken London’s monopoly on Islamic finance on the global scene.
Another strong backer has been Mike Loftus, the head of investment body Locate in Birmingham.
He said the turmoil in Dubai was a global corporate failure and had little to do with the consumer and retail-focused services of IBB.
“I wouldn’t see that as having a dramatic impact on the whole range of other areas where people of the Islamic faith need banking services.”
The IBB is the only stand-alone Islamic retail bank in Europe. It opened its first branch in September 2004, and has pioneered a number of new products compliant with Sharia financial law, including business banking and commercial property finance. Several of its products remain unique in the UK retail market, for example Sharia-compliant personal finance and online savings accounts.
Since the launch, customer numbers have gone from about 14,000 to nearly 50,000. It manages 71,500 accounts worth £23.5 million.
Mr Loftus said: “Through its consistent growth and development the bank has helped to put Birmingham on the global Islamic finance map.”
According to a 2008 study, the UK has two million Muslims, of whom 1.3 million are of working age. Nearly 400,000 use Sharia finance products.
Sultan Choudhury, the commercial director at the bank, said: “IBB is delighted to have reached the five-year mark. As a relatively young financial institution compared to conventional banks, our dynamic growth has helped to place IBB as a market leader within our field.
“Since its inception the bank has gone from strength to strength and is proud of its reputation as the pioneer of Islamic banking in the UK. IBB has worked closely with the UK Government, regulators, industry bodies and customers to provide products and services which make a difference to British Muslims.
“Further, the bank has made a significant contribution to the UK banking sector and the Islamic finance industry, particularly over the recent months when conventional banks were suffering chaos and instability. Despite the difficulties, IBB demonstrated the robustness of Islamic banking and its five-year anniversary illustrates that the bank is here to stay.”
As well as attracting interest from outside the Muslim community, the success of IBB has been hailed as a sign of the increasing success of British Muslims.
Dr Abdul Bari, the secretary-general of the Muslim Council of Britain, said: “We have given strong support to the development of Islamic finance in Britain and the launch of IBB as the first Sharia-compliant retail bank in Europe was a major milestone on this journey. We are delighted IBB is ensuring that British Muslims and others who want ethical finance have access to financial products in line with their beliefs.”