ReachX logo

Islamic banking primed for UK market growth

Publication Date: 15 Apr 2019 - By ReachX Team By ReachX Team
Actionable
Differentiated

Macro Equity Fundamental Multi Asset UK Financial Services

Islamic finance firms based in the UK look set for growth over the next five years, according to a new report. 

In note to clients, rating agency Moody’s said operators in the British market offering Islamic finance have been establishing themselves as niche players in wealth management and retail banking over the last several decades.

"With the UK emerging as a Western hub for Islamic finance, UK-based lenders will benefit from increased international demand for Shari'ah-compliant banking, while the Islamic FinTech sector will likely drive further growth," said Arif Bekiroglu, Senior Analyst at Moody's. 

"Regulations are broadly supportive, as illustrated by the harmonisation of the tax treatment of conventional and Shari'ah-compliant products."

Of course, while the sector's growth prospects appear favourable, its prohibition of interest payments prevents it from using a range of conventional funding and liquidity sources, inflating its funding costs relative to mainstream UK lenders. The Bank of England is said to be working on potential solutions.

At present, there are five Shari'ah-compliant UK regulated banks, while four Middle Eastern lenders provide Islamic banking services via their UK branches. 

These banking operations focus mainly on wealth management and retail banking, including mortgage lending. 

According to Moody’s, wholesale Islamic banking services, including sukuk issuance, are dominated by two investment banks. The UK Islamic finance sector also includes 19 Fintechs active in areas ranging from student finance to peer-to-peer lending. 

Disclosure:

I have no positions in any of the securities referenced in the contribution

I do not use any non-public, material information in this contribution

To the best of my knowledge, the views expressed in this contribution comply with UK law

I agree with the terms and conditions of ReachX

This contribution is for informational purpose and does not constitute investment advice nor is it an offer to sell or buy, nor is it a recommendation for any security.

ReachX Team

 

Most read

ReachX
1-15 Clere Street, EC2A 4UY
London, United Kingdom
info@reachx.co
ReachX
1-15 Clere Street, EC2A 4UY
London, United Kingdom

info@reachx.co
Sign up to our newsletter