UK high street bank Lloyds TSB has launched a Shariah-compliant nostro account that enables customers to transfer money around the world in line with Islamic principles prevents any funds being invested in industries – such as alcohol and gambling – that are prohibited under Islam. Lloyds TSB says the account, which is aimed at the UK’s two million Muslims and 100,000 Muslim firms, is the first of its kind to be offered by a mainstream western bank. Whilst many Muslim customers make and receive international payments through an estimated 250 Islamic banks worldwide, the process of transferring the money between banks has not been in line with Islamic principles, says the UK bank. “We’ve designed this account to help the growing number of Islamic banks across the world, which deal with our customers’ transactions,” says Diana Brightmore-Armour, CEO corporate banking and co-head corporate markets, Lloyds TSB. “We’re providing the missing link in the chain, so now any person or business receiving payments from abroad into their own Islamic account knows the money will be dealt with according to Islamic law, from start to finish.”
It’s the fastest-growing sector of the banking industry, yet few City boys know much about it and hardly any finance students are being taught it. But Islamic banking’s mysteries are now beginning to be unveiled and just this last month a business school and an accountancy body have announced new postgraduate programmes specialising in it. There are more than 250 Islamic banks worldwide, with at least _300bn in assets, up from _5bn in 1985. Small fry in the global economy, but growing at an astonishing 15 to 20 per cent a year. Rising oil prices and Europe’s growing Muslim population are driving an extraordinary surge in financial products compliant with Islamic law, eschewing interest and respecting Islamic ethical norms in investment. Just a few years ago, Islamic banks stood accused of funding terrorism. Now Gordon Brown has promoted London as a hub for Islamic finance, three British Islamic banks have been set up, and big players such as HSBC and Lloyds TSB have started offering Islamic financial products and services. To train bankers to develop these products, Bangor University’s business school is starting up a fully fledged Islamic banking Masters this September, the only university so far to offer one. Nick Jackson reports.
The bank has taken advice from Islamic scholars A new High Street bank account compatible with Islamic sharia law is due to be introduced. The Lloyds TSB account will offer no interest or overdraft facilities, as under Islamic law the receipt and payment of interest is forbidden. The introduction of the account follows the opening of a specialist Islamic bank in the UK last year. Gordon Rankin of Lloyds TSB said its new account would make Islamic banking “mainstream”. “Our research shows that over three-quarters of British Muslims want banking services that fit with their faith. “However, until now their banking needs have been largely uncatered for and many British Muslims have often had to bank in a way that is against their principles,” Mr Rankin said. Scholars’ Guidance Ibrahim Mogra, the chairman of the Muslim Council of Britain’s Mosque and Community Affairs committee, agreed that many of the UK’s two million Muslims have had little choice but to use interest-paying accounts. I think all High Street banks will take this route sooner or later because there’s a huge Muslim market in the UK. “What the sharia scholars tell us to do is whatever interest you gain you get rid of it without the intention of gaining reward from God. “Even though at the end of the year I just take the interest out and give it away, I’ve still, in a way, handled money from interest which I really shouldn’t be doing,” he said. Until the opening last year of the first UK-based specialist financial institution – the Islamic Bank – Muslims were able to access sharia-compliant current account facilities only through Middle Eastern banks with branches in the UK. The Islamic Bank opens its third branch in Leicester on Tuesday and plans to open five more by the end of 2005. Ibrahim Mogra of the MCB believes other high street banks will now follow Lloyd’s TSB’s lead: He said: “The high street banks want to hang on to their customers and now there is an Islamic bank available they may be anxious they might lose their customers. “I think all High Street banks will take this route sooner or later because there’s a huge Muslim market in the UK.”