Islamic Banking and Finance in the European Union

Islamic Banking and Finance in the European Union

A Challenge

Studies in Islamic Finance, Accounting and Governance series

Edited by M. Fahim Khan and Mario Porzio

This timely book examines the authorization of Shari’ah-compliant intermediaries as either credit institutions or as investment companies in the European Union.

Chapter 15: Islamic Banking in the United Kingdom

Rodney Wilson

Subjects: economics and finance, financial economics and regulation, islamic economics and finance, money and banking


Rodney Wilson This chapter examines the experience of Islamic banking in the United Kingdom since 1980, focusing on wholesale operations, retail saving and investment products and home finance. Regulatory and legal issues are discussed, as well as institutional developments and the challenges of serving the British Muslim community of over 1.8 million people. The operations of exclusively Islamic banks are examined, notably the Al Baraka International Bank during the 1980s and early 1990s and the Islamic Bank of Britain from 2004. The activities of conventional banks offering Islamic facilities are also analysed, the focus being on the United Bank of Kuwait and its successor the Al Ahli United Bank, and more recently HSBC through its Amanah Islamic finance subsidiary and Lloyds TSB. SHARI‘AH-COMPLIANT LIQUIDITY MANAGEMENT Initially the major Islamic finance activity involved wholesale operations, with banks in London providing overnight deposit facilities for the newly established Islamic banks in the Gulf. These Islamic banks could not hold liquid assets such as treasury bills, which paid interest, but the joint venture Arab banks in London, such as Saudi International Bank and the United Bank of Kuwait, accepted deposits on a murabaha mark-up basis, with the associated short term trading transaction being conducted on the London Metal Exchange (Maroun 2002, 163–75). Although the staffs of the joint venture banks were mainly British and non-Muslims, they became increasingly well informed about Shari‘ah requirements regarding finance, and were able to respond to the demands of their Muslim clients in an imaginative...

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