The Shariah-compliant Islamic home finance scheme was launched this week by Lloyds TSB, the UK High Street bank, at five branches in London, Luton and Birmingham, all of which are prominently populated with Muslims.
Lloyds TSB will now be developing and co-branding a product, the Alburaq Home Financing Scheme based on the initial diminishing Musharaka contract, which is a declining equity participation scheme between buyer and lender. The Musharaka contract was brought into being last year by ABC International Bank and Bristol & West, a subsidiary of the Bank of Ireland Group in London.
The Shariah Board of ABC International Bank headed by Sheikh Nizam Yaquby, a noted Bahraini Shariah adviser to several Islamic financial institutions and to Dow Jones Indexes in New York, along with two home-bred British Islamic scholars, Mufti Abdul Kadir Barakatulla and Mufti Mohammad Nurullah Shikdar, has approved the Alburaq product for Shariah compliance.
Certain specified branches of the High Street Bank will first test market the Lloyds TSB scheme to test its efficacy. Lloyds TSB, meanwhile, claims to offer exclusive modified and adapted services, with Islamic home finance being provided from a single provider since the Alburaq product is a registered trade mark of ABC International Bank.
The first ever Islamic banking current account launched by Lloyds TSB last month seems to have heralded the introduction of a committed set of Islamic financial products in the UK market. Gordon Rankin, current accounts director, explains that in spite of UK being occupied by Muslims in large numbers, their banking needs were not being attended to.
Most British Muslims were often forced to bank in ways other than what their principles suggested. They wanted a system that could conform to ‘their’ ways of banking and stick to their ‘faith’. Lloyds TSB, therefore, had finally thought of a way to cater to the banking needs of the Muslim population and thereby introduced their new Islamic current account.
Islamic Banking in UK witnessed two other developments last week when the British government, through the Office of the Deputy Prime Minister (ODPM), launched a consultation paper on proposals in order to aid council tenants in the UK who wanted to make use of non-standard mortgage products such as Islamic Murabaha (Mark-up), Ijara (leasing), or diminishing Musharaka mortgages (co-ownership) for house purchases but were unable to do so because of the prevalent ‘Right to Buy’ rules. What’s more, even Gordon Brown announced in his pre-election budget that further legal reforms were underway to boost Islamic home financing schemes in the UK.
Other banks have also surfaced now with interests to co-brand with Alburaq since developing their own product will prove to be very expensive. The Alburaq home financing scheme offers the same consumer and mortgage protection provisions as conventional mortgages and presents probably the best combination of British financial engineering and expertise and Islamic financial principles, which in turn prohibit the practice of charging and giving of interest.
Lloyds TSB is now on its way to market its Alburaq product. The ABC International Bank will be responsible for all applications, underwriting all mortgages. Bristol & West will provide back-office administration support.
Posted
on : Mon, 21 Mar 2005 00:00 GMT | Mortgages News
By : Paula Jenkins
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