Demand — and supply — for “halal” financial products on the rise

Saving and investing in line with religious principles is important for many Muslims and an increasing range of financial products is now available to meet Sharia rules. There are 1.8 million Muslims in Britain and surveys show that about three-quarters are interested in the idea of running their savings and investments in keeping with principles laid out in the Koran. While Sharia products are in their infancy in the United Kingdom, the uptake is very rapid.

While trade and investment are encouraged, Sharia rules prohibit involvement in companies whose activities touch on a wide range of industries including alcohol, gambling, pornography, human cloning, arms and many forms of entertainment. Industries associated with pork are also out. However, the biggest difficulty for devout Muslims and those financial groups which aim to serve them is the principle of riba. Riba means that you cannot receive or pay interest, because Islam defines interest as a form of usury.

Interest is hard to remove from any financial transaction. The entire conventional banking industry, with products from mortgages through to credit-cards and deposit accounts, depends on calculating interest. The answer that Sharia-compliant accounts offer is to convert the interest normally paid into a form of profit or loss. Accounts or mortgages will often be marketed as offering competitive rates measured against non-Sharia, interest-based products, but the structure of the financial proposition is different. British banks have come up with a wide range of Islamic financial products such as accounts, mortgages, investment plans and credit cards, adapting to the strong demand among the Muslim population.