Islamic mortgages for all faiths: Scotsman

By GRAHAM BURNSIDE

THE need to return to traditional banking values is a debate that has been well and truly reignited by the economic crisis.

Ethics and responsible lending are high on the agenda as we come to terms with the fallout from the crises that have hit some of the world's leading banks. It is therefore not surprising that attention is turning increasingly to Islamic finance as a stable alternative.

While "toxic" debts have swamped conventional banks across the world, Sharia'a compliant financial products have continued to expand. Islamic institutions have avoided massive writedowns in their assets because they carried no exposure to complex financial instruments or derivatives.

Following its ethical principles, all financial transactions within an Islamic finance system must be connected to a tangible asset. Islamic banks use their own funds and will not issue interest-bearing instruments to finance loans; they avoid transactions which are essentially speculative and trading in unowned assets (such as short selling) is prohibited.

But it would be a mistake to think that Islamic finance is only for the Muslim community. It is open to all faiths and Scotland's new Islamic mortgage could, for instance, provide a novel stimulus to support Scotland's property market.

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Crossing over to Islamic banking: Times online

Sharia-compliant finance is prospering in Britain. But how can it stay insulated from the credit crunch?

Alex Wade

As the credit crunch has mutated inexorably into a recession, with bankers having eclipsed politicians, lawyers and even journalists as public enemy number one, the growing number of Islamic finance institutions in Britain might just be sitting pretty.

The UK now has five fully Sharia-compliant banks and another 17 financial institutions have set up special branches or firms. They include the Qatar Islamic Bank (QIB), with its London-based European Finance House in Berkeley Square, and the Islamic Bank of Britain, which has headquarters in Birmingham.

Both have answered Gordon Brown’s call of two years ago for Britain to become the global centre for international Islamic banking; a report by the International Financial Services London even says that Britain’s Islamic banking sector is now bigger than that of Pakistan.

Islamic banks, says Steven Amos, the Islamic Bank of Britain’s head of marketing, are prospering. “Our core business will always be Muslims but the numbers of non-Muslims are really picking up. We’ve had massive interest — and that’s down to a number of reasons, all of which have kept us insulated from the credit crunch.”

He alludes to the nuances of Islamic banking — specifically that Islamic finance has to be Sharia, or Islamic law, compliant. Sharia is taken from the Koran, one of whose central tenets — that money has no intrinsic value — might sound alien to the denizens of the City.

One British businessman believes that adopting Sharia principles might be just what the West needs.Roger Smee, a former professional footballer and now businessman, says the West has “lost the plot. All we have as a success guide is a number of rich lists. Instead of looking down on what we are quick to reject as cumbersome legal restrictions, we should take a page out of the Middle East’s book and use the principles of Sharia to begin building real and sustainable economies.”

Smee, who divides his time between the US, Europe and the Middle East on his real estate and office interiors business, realised six years ago that a financial time bomb was ticking. I was offered a controlling stake in a new US mortgage business. The company was involved in the refinancing of huge numbers of house mortgages, lending at 125 per cent of an already overinflated property value to people who obviously did not have the funds to maintain payments. As we now know, these loans were then packaged up and sold on, earning the mortgage business a 7 per cent fee on each transaction. But the underlying finances were totally flawed.”

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UK working to offer sukuk in sterling: Gulfnews

By Rachna Uppal, Staff Reporter

Dubai: A UK sukuk bond in sterling may well be offered "sooner rather than later", according to the Lord Mayor of the City of London. Ian Luder was at the Dubai International Financial Centre with his delegation, and later addressed students in the Executive MBA programme at Cass Business School.

Twenty-two banks in London already offer Islamic finance services, an indication of the growing importance of Sharia financial products for the UK's financial services industry. Luder emphasised though that there must be an agreed world standard for Islamic finance products for the market to meet its potential.

"We are still working towards amending the legislation for the treatment of the repayment on the sukuk of the coupon, so it's in line with the treatment for the interest on a normal coupon," said a delegation member.

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