Demand for Islamic home finance at all time high
Al Rayan Bank, the UK’s largest Sharia compliant retail bank, has revealed that the number of applications for its Home Purchase Plans (HPPs) and Buy To Let Purchase Plans (BTLPP) reached an all-time high in 2016 as demand for Islamic home finance continued to increase.
Demand, as measured by the volume of eligible enquiries to the Bank, increased by 9% in 2016 and has increased by 99% in the last five years, indicating that Islamic banking has become a preferred method of property financing for a significant number of people.
Commenting on the increase in the demand for the Bank’s Islamic home finance products, Keith Leach Al Rayan Bank’s Chief Commercial Officer said, “In recent years we’ve worked hard to ensure that ethical, Sharia compliant banking products are as accessible as possible to customers of all faiths. We’re therefore very pleased that our products, and Islamic banking in general, is clearly becoming an established part of British retail banking. There is still substantial room for growth in this market and we expect demand to continue to rise in the coming years.”
HPPs and BTLPPs are joint ownership agreements which do not involve interest, as Muslims believe that interest promotes financial unfairness in transactions which ultimately leads to financial unfairness in society. Al Rayan Bank’s customers purchase their properties together with the Bank as partners. Over time they acquire the Bank’s share through a monthly acquisition payment, whilst paying rent to use the portion of the house that they do not yet own.
The increased demand for Islamic home finance is mirrored by an increase in the value of Sharia compliant savings provided by Al Rayan Bank. Last year the value of Islamic savings, which are ethical profit sharing agreements that avoid interest, increased by 47% compared with the previous year and by 449% compared with 2012. Notably Al Rayan Bank believes that significant proportion of the increase has come from non-Muslim customers.
Al Rayan Bank estimates that 94% fixed term deposit customers who joined the bank last year, and 26% of all customers choosing to bank with it, are not of the Muslim faith.
Al Rayan Bank is an Islamic Bank, founded on faith-based, ethical principles that derive from trade, entrepreneurship and risk-sharing, in which the customer and bank work together as partners towards a mutually profitable end. These principles prohibit Al Rayan Bank from investing savers’ deposits in unethical activities such as gambling, pornography, speculation, tobacco, arms and other activities not in keeping with the values of Islam.
Al Rayan Bank’s overall approach has earned it national recognition as an ethical alternative to conventional banking by the Move Your Money campaign. The Bank can also be found in the top ten of ethical current account providers, according to ratings compiled by Ethical Consumer magazine.
Al Rayan Bank is authorised by the Prudential Regulation Authority, regulated by the Financial Conduct Authority and the Prudential Regulation Authority, and is a member of the Financial Services Compensation Scheme.