Finance influenced by Islam
Feb 9 2008 by The Journal
THE storm caused by the Archbishop of Canterbury this week would suggest it may take a while before Islamic laws become a widely accepted part of British society.
However, in the finance sector, Sharia law is very much an established part of life on these shores.
As the UK’s Muslim population grows, so too does the demand for Islamic financial services and in turn, the number of banking groups looking to cash in on the increasingly lucrative sector.
In simple terms Islamic finance differs from conventional finance in two ways. The first is the no-interest rule – you can not earn or pay interest on loans.
Second, that money is only allowed to be invested in worthy causes or in a socially responsible way. For example, under Sharia law, investors would be unable to invest in shops that sold tobacco, alcohol or pornography.
The North East may not have such a thriving Islamic finance sector as London or parts of the North West, but things are changing and there are a number of Sharia-compliant packages available to Muslims in the region.
Both HSBC and Lloyds TSB offer various Islamic services on the high street, including mortgages and pension funds.
But it is in the wholesale finance sector where there is real growth in the sector.
Last year a prominent building on Newcastle’s Quayside was sold in what was thought to be the first real estate transaction to comply with Sharia law involving two Islamic institutions based in the UK.
The offices of Newcastle law firm Ward Hadaway were acquired by a fund sponsored by European Islamic Investment Bank (EIIB) plc.
Dr Jane Pollard, senior lecturer at Newcastle University’s Centre for Urban and Regional Development Studies is currently writing a funded research project on the growth of Islamic finance.
She said: “Nationally people talk about Islamic finance growing at around 15% annually but most of that is not for consumers, it’s large corporate wholesale trade deals fuelled by a lot of excess liquidity in the Gulf.”
Andrew Fitton of PricewaterhouseCoopers LLP in Newcastle, said: “I’m certainly aware of North East businesses considering Islamic finance in certain cases as a financing option because, as is widely reported, there are Islamic funds looking for investment opportunities. Its a funding opportunity for businesses in the region to consider.”