2.3
Islamic Mortgages
Sultan Choudhury, Islamic Bank of Britain, and
Shaher Abbas, Islamic Finance Advisory and
Assurance Services
Introduction
It is estimated that over £1 billion of finance has been advanced by banks in
the UK to finance residential property in a Shari’a-compliant manner. The
size of this market is estimated to grow to £1.4 billion by 2009. Islamic home
finance products have been available in the UK for over 10 years, and even
mainstream institutions such as HSBC offer Shari’a-compliant products.
There are already similar offers of home finance services in the US and
Canada. Institutions in the US, such as Guidance Financial, have been
providinghalalhome finance for many years, and providers like LARIBA
have proved so far to be a success amongst the growing and affluent
American Muslim population. The Islamic Cooperative HousingCorporation
based in Toronto, Canada has also been operating productively since its
establishment in 1981. Expansion in the market is taking place despite the
recent credit crunch in the US. However, to date the availability of these
products in Europe has proved to be a challenge despite the large numbers
of Muslims residing there.
Islamic housing finance in the UK
Historically, there have been two notable attempts byfinancial institutions
to provide Shari’a-compatible financial products to the UK Muslim commu-
nity. The first attempt was made in the late 1980s by Al-Baraka bank;
another attempt was made in the late 1990s by the United Bank of Kuwait
(currently Ahli United), followed by a major breakthrough when HSBC bank
become the first high street bank in the UK tooffer Shari’a-compliant home
finance. Soon after, ABC bank and Bristol and West building society (now
part of Bank of Ireland) joined efforts to launch Alburaq−a brand name of
ABC−to sell a new home finance product. Currently there are five providers
of home finance in the UK, including Islamic Bank of Britain.
Although, to date, market participants are few and the market in general
is a modest niche, this market can potentially grow due to the relatively
