Nestled in a typically English period building on the outskirts of Birmingham, Al Rayan Bank is Britain’s largest and oldest Islamic financial institutions.
These quaint UK headquarters belie the multicultural and globalised appeal of Britain’s first fully Sharia-compliant retail bank, which is fast snapping up customers – no matter which faith.
“The bank’s ethical nature and competitive savings products have driven its growth in popularity among money-savvy consumers in the UK,” Sultan Choudhury, CEO of Al Rayan, tells Arabian Business.
“A number of our savings products currently sit at the top of the savings charts ahead of other well-known high street banks.
“UK customers are more astute than ever when it comes to their savings. We’re a viable option to Muslim and non-Muslim customers alike.”
Islamic finance appeal
Today, over a quarter of Al Rayan’s customers are non-Muslim. This sizeable figure reflects a wider trend in the global appeal and growth of Islamic finance products.
In 2015 the global Islamic finance sector climbed 7.5 per cent to $2 trillion, according to financial industry advocacy group TheCityUK. The Islamic financial services sector could be worth as much as $3 trillion within the next decade, according to ratings agency Standard & Poor’s.
Today the number of institutions in the UK offering Islamic finance far outstrips other western countries. There are a number of factors galvanising this growth.
In October 2013, the then UK Prime Minister David Cameron announced that London would assume a position of significance in the Islamic finance market. Cameron said he wanted “London to stand alongside Dubai as one of the great capitals of Islamic finance anywhere in the world”.
Britain’s sizeable Muslim population, around 4.5 per cent of the country according to the 2011 census, has also played a driving role in helping to establish London as the focal point of Islamic financial services.
Seizing the market
With 80,000 customers and 14 offices and branches, six in the UK capital, Al Rayan Bank now offers the largest range of Sharia-compliant savings accounts, Islamic savings accounts (ISA) and home-purchase plans (HPP) in Britain.
Choudhury, a Bangladeshi Briton, has been at the bank since it was founded by a small group of Middle East investors with a start-up fund of £14 million in 2004.
The CEO has been central in driving Al Rayan’s growth since it was acquired in 2014 by its Qatari parent, Masraf Al Rayan, one of the world’s largest Islamic banks.
Al Rayan’s assets reached £1.81 billion in 2017, up 26 per cent from £1.43 billion in 2016. The bank’s profits before tax for 2017 rose by 15 per cent to £9.45 million, up from £8.18 million in 2016.
What’s more, the bank made its mark on the global financial map last year when it became the first UK Islamic bank to receive a public credit rating from Moody’s. Choudhury soon leveraged the bank’s Aa2 rating to issue the world’s first public sukuk in a non-Muslim country.
He says, “This was the largest ever sterling-dominated sukuk issued by a UK entity. This listing not only confirms the UK’s standing as a leading global centre for Islamic finance and expertise, but also demonstrates the growing awareness of Islamic finance in the UK more generally.”
The sukuk, which was backed by Al Rayan’s HPP product, saw a successful launch in Q1 2018 on the London Stock Exchange. This issue was more than 150 per cent subscribed and raised £250m of diversified funding for the bank.
Islamic mortgages on the rise
Choudhury, who received in OBE in 2017 for his services to Islamic finance, says HPP products are soaring in popularity in the UK for Muslims and non-Muslims alike.
“This year, we launched our first 90 per cent and 95 per cent finance to value Home Purchase Plans in reaction to the withdrawal of the UK government’s Help to Buy scheme,” he says.
“We’re the first and only Islamic bank in the UK to offer support to buyers who may have only a small deposit at their disposal and may not be able to secure alternative funding methods to support the purchase of a home.”
Choudhury also says the bank’s traditional religious values of prudence and ethical investments are increasingly chiming with conscious consumers in the UK.
“The bank’s values are very closely aligned with those of an increasing number of UK consumers. With all Al Rayan Bank’s products, the customer’s money is always invested ethically,” he says.
“Customers are given a promise that their funds will only be invested in Sharia-compliant, ethical investments. These exclude all interest-bearing transactions and activities such as gambling, speculation, tobacco and alcohol. This not only appeals to our Muslim audience, but to those who want to bank in an ethical way.”
Choudhury adds: “While Islamic finance initially appealed to a predominantly Muslim audience, its appeal is growing among all communities.
“We believe that the future isn’t just about meeting the needs of a Muslim community, but also non-Muslim customers looking for a more ethical way of banking.”
Sharia-compliance
The CEO insists that mainstream banking investments are often ‘high-risk’, and the customer is given ‘no insight’ into the background of the investment.
He says: “The customer is segregated from the decision-making process. However, Sharia-compliance introduces the idea of risk sharing and enables the customer to be part of that process.
“This transparent way of banking is becoming more popular and has scope to become more popular still as people look for more responsible, ethical ways to invest their money.”
Choudhury says he also predicts a similar rise in popularity for wholesale Islamic finance in Britain.
“Our sukuk was oversubscribed, with 97 per cent of investors coming from non-Islamic financial institutions, such as asset managers and pension funds.
“This reflects the strong demand for Islamic financing instruments that exist in the market, and the fact that the UK is well positioned to become the destination of sukuk issuance for Western Europe.”
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