Islamic Bank of Britain Welcomes Help to Buy: HPP guarantee scheme

11 February 2014

Islamic Bank of Britain plc (IBB, www.islamic-bank.com) the UK’s only wholly Sharia compliant retail bank, has been working with the UK Government on the development of a Help to Buy: Home Purchase Plan (HPP) guarantee scheme.  The scheme was launched today and will enable Sharia compliant banks, such as IBB, to offer UK Muslims affordable home finance. 

IBB’s support to the Government for the scheme was headed by Samir Alamad, Head of Sharia Compliance & Product Development.  He commented, “The launch of the Help to Buy: HPP guarantee scheme represents an important step for the UK Islamic finance industry.  By adapting the original mortgage guarantee scheme, HPP providers and customers can benefit from the same Government support that mortgage lenders and borrowers have enjoyed. It has introduced a level playing field for Islamic banks and consumers alike, and IBB is delighted to have been working closely with the Government to pioneer this exciting development.” 

The Financial Secretary to the Treasury, Sajid Javid, said, “I am delighted Home Purchase Plans will now be available under the Help to Buy scheme. This gives even more choice to hardworking families across the UK trying to fulfil their home owning aspirations.”

HPPs are Sharia compliant, ethical mortgage alternatives, available to consumers of all faiths and beliefs.  They differ from a mortgage where the customer borrows money from a lender which is then repaid with interest. A HPP uses the Islamic finance principles of co-ownership (Diminishing Musharaka) with leasing (Ijara), where the Islamic bank and the customer buy the property as partners and the customer pays rent on bank’s share in the property. At the end of the term, when all acquisition payments have been made and the finance has been settled, ownership of the property transfers fully to the customer.

The Help to Buy: HPP guarantee scheme works in a similar way to the Help to Buy: mortgage guarantee scheme, but takes into account the different way that a HPP is structured. It will enable banks to purchase a guarantee for their Home Purchase Plans where the consumer has a deposit of between 5% and 20%. The guarantee will compensate the bank for a portion of net losses suffered in the event of default. This will reduce their risk of offering home finance to consumers with a low deposit.  The original scheme was launched in October 2013 in order to increase the availability of low-deposit finance for UK households.

IBB estimates that there are about a million UK Muslims adults with a need for its savings and home finance products, who are also inclined towards Sharia compliant finance.  Recent, independent research conducted by 2Europe for the Bank also reveals that 81% of Muslims either currently use or would consider using Islamic finance.  This is backed by figures from the 2011 Census of England & Wales which identified that the UK is now home to 2.7m Muslims, up from 1.5m in 2001.  It is the UK’s second highest religion behind Christianity and ‘no religion’.

Islamic finance offers consumers a different approach to banking.  It operates entirely without the main instruments of the conventional finance sector, including interest and speculative products. The whole premise of Islamic finance is to provide a way for society to conduct its finances in a fair, ethical and socially responsible manner. IBB was formed in 2004 and has attracted over 50,000 customers

ENDS

About Islamic Bank of Britain

Islamic Bank of Britain plc (the Bank, IBB) has pioneered Sharia compliant retail banking in the UK and now offers the largest range of Sharia compliant retail financial products in the UK. These include Sharia compliant mortgage alternatives, the Home Purchase Plan (HPP) and Buy to Let Purchase Plan (BTLPP), current accounts and savings accounts. The Bank was also the first to introduce Sharia compliant business banking to the UK, and now offers a wide range of institutional and business banking products and services, including Commercial Property Finance. Several of the Bank’s products remain unique in the UK retail financial market.

The Bank is authorised and regulated by the Financial Conduct Authority and Prudential Regulation Authority and is a member of Financial Services Compensation Scheme. 

Sharia compliant banking operates without the use of interest and is founded on Islamic finance principles derived from trade, entrepreneurship and risk-sharing. IBB has a dedicated Sharia Compliance Officer (SCO) and a panel of respected Sharia Scholars, called the Sharia Supervisory Committee (SSC), which acts as an independent body to ensure that IBB’s products and activities are Sharia compliant.   As a Sharia compliant bank, the source of IBB’s funding, profits and business investments must be ethical.  They cannot be from businesses that are considered unlawful under Sharia law, i.e. companies that deal in interest, alcohol, gambling, pornography, speculation, tobacco, arms and other commodities contrary to Islamic values.

Whilst IBB offers products and services that are designed in accordance with Sharia principles, it is an inclusive, ethical organisation and welcomes customers of all faiths looking for a bank with a transparent, prudent and community-focused approach.

Notes to editors:

Interviews with Islamic Bank of Britain are available on request. The bank should only be referred to as “Islamic Bank of Britain”. If abbreviated please use “IBB”.

ENDS

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