Tuesday, March 17, 2009

BRITAIN: Islamic finance firms in Britain sitting pretty

Neill Gibson, a partner in Trowers & Hamlins who works on many Islamic finance matters, told The Times in a recent article that Islamic finance would not have touched the subprime markets "but it won’t have been protected from other badly hit sectors, such as real estate".
The article entitled "Crossing over to Islamic banking: Shariah-compliant finance is prospering in Britain", quoted a lawyer dabbling in Islamic finance as saying that Shariah can permit certain futures and options structures, such as the "salaam" (sale contract with a deferred delivery) and "arboun" (sale contract with a non refundable deposit), it prohibits convoluted derivative products.
"An asset has to be visible. If you can’t see it, it’s unlikely to be Shariah-compliant," Hamid Yunis, the head of the law firm Taylor Wessing’s Islamic finance practice, said in the report. The article began by saying that as the credit crunch has mutated inexorably into a recession, with bankers having eclipsed politicians, lawyers and even journalists as public enemy number one, the growing number of Islamic finance institutions in Britain might just be sitting pretty.
It noted that UK now has five fully Shariah-compliant banks and another 17 financial institutions have set up special branches or firms.
They include the Qatar Islamic Bank (QIB), with its London-based European Finance House in Berkeley Square, and the Islamic Bank of Britain, which has headquarters in Birmingham. The report also quoted an Islamic bank marketeer as to why Shariah banking would have survived the onslaught of the credit crisis. "Our core business will always be Muslims but the number of non-Muslims are really picking up.
"We’ve had massive interest — and that’s down to a number of reasons, all of which have kept us insulated from the credit crunch," said Steve Amos who heads marketing at Islamic Bank of Britain. He alludes to the nuances of Islamic banking — specifically that Islamic finance has to be Shariah, or Islamic law, compliant.

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