Image that it was offensive, not to say Islamic finance was on the up and up!!
No need for those Shari'a laws ~ then!!
Firstly is it wise to have anything to do with Shari'a ~ you wondered whether it was going to be a specific dress code for women in the Islamic finance areas of banks [which is derogatory in itself]?
The whole thing seemed hyped!! And to prove it ~ it is fizzling faster than it took time to set up.
Islamic financing appears to have fallen on hard times in Britain.
Once heralded as a huge growth opportunity for banks (considering the U.K. has an estimated 2.4 million Muslims), a lack of competitive rates has instead led to some banks axing their Shariah-compliant product offerings completely.
"Most of the Islamic offerings are simply not competitive compared to their conventional counterparts," Ahmad Alanani, an associate director for the Middle East and North Africa at Exotix Ltd. in London, told Bloomberg earlier this month. "They have failed to achieve the mass appeal it was hoped they would."
Islamic financing took off in the U.K. a few years ago, when banks such as Lloyds Banking Group PLC began offering financing that complied with Islam's ban on interest payments. A perceived demand led to 22 lenders tapping into the market by the end of last year. But the flurry of new Islamic financial offerings has since sputtered out. Lloyds, for example, canned its Shariah-based mortgages earlier this year.
The U.K. is one of Europe's largest markets for financial products complying with Islam, according to Bloomberg. The country is home to roughly $19-billion worth of Islamic assets. But what was once widely seen as a rapid growth market is hitting a wall, hampered by a drop in customers and haphazard regulation.
The Birmingham-based Islamic Bank of Britain. for instance, saw a sharp drop in Islamic loans in 2009, with US$4.6-million worth of transactions occurring compared to US$12.2-million in 2008.
A drop in customers means some banks are deciding what's already a small market might not be worth their time. The Islamic mortgage market comprises a mere £500-million in the U.K., or about 0.3% of total home loans, says an International Financial Services report released earlier this year. And that number likely won't increase anytime soon.
Much of it has to do with a lack of competitive rates. Because Islam forbids charging interest on a loan, banks offering Islamic financing handle mortgages differently. Instead of offering a loan, the lender will buy the house on behalf of the borrower, and then resell it to them at a profit. Meanwhile, the home buyers pay back the final quoted price in instalments.
But financing isn't the only area that's sputtering. Islamic bonds, or Sukuks, have been in limbo in the U.K. for quite some time. In 2008, the U.K. government said they would not provide a benchmark for issuing Sukuks because the bonds didn't offer "value for money", according to Bloomberg. A similar ruling was made again earlier this week.
There have been attempts to bring Shariah-compliant offerings to Canada. In March, UM Financial, a Toronto-based Islamic financing firm, launched a credit card under the Mastercard brand that didn't charge interest. Holders load up their card with up to $6,000 in advance, and each purchase draws down on the account without accruing interest. Cardholders pay $50 to use the card for two years, and are charged 95¢ to transfer funds to the card.
The Toronto Stock Exchange also launched a Shariah-compliant index last year, and there have been individual investors who offer Islamic mutual or hedge funds. However, since most of these offerings are relatively new, there isn't a firm gauge of how they are performing yet.
Meanwhile, Shariah-compliant loans in Europe, the Middle East and Africa have dropped 35% in 2010 to US$2.32-billion, the lowest level in five years, Bloomberg says.