Hi all,

Does anyone have any info about this bank's future potential. They are likely to expand to at least 10 locations in the UK and then there is the possiblity of passporting their approved status here in the UK to other European countries..

UK Market

The core market is the 1.8 million-strong Muslim population of Britain, of which market research suggests about three quarters are devout and potential customers for the bank. There are also some 600,000 Muslims who visit the UK during the summer months to escape the Middle East heat. They will be part of the target market, Mr Hanlon said. The banks seed capital of 14 million, required for the banking licence is provided by investors from the Gulf, including members of the royal family in Qatar, as well as British Muslims. A share offering later this year will raise the equity to 50 million and Mr Hanlon hopes that British bank customers and others in the Gulf will be among those to buy shares.

European Market

Western banking institutions have long considered Islamic finance to be a niche market exclusive to devout Muslims, but the sheer scale of the market and the depth of liquidity of Islamic insitutions in the Gulf is encouraging wider interest. Last month the German state of Saxony-Anhalt raised 100 million (66 million) by issuing the first European Sukuk, an Islamic bond.

USP

Unlike some high street banks, such as HSBC, which offer Sharia-compliant mortgages, Islamic Bank of Britain will be fully compliant with the Koranic stricture banning the payment or receipt of interest. In addition, the bank will not invest in business dealing with tobacco, alcohol or pornography, an aspect that Mr Hanlon hopes may attract a wider market than the Muslim community.

Looks good to me though has this been attempted in the past?

Any feedback, comments welcomed!!!

attached other Sunday Times article:

Islamic bank taps into 100bn market
By Carl Mortished, International Business Editor



A NEW breed of bank is courting Britains two million Muslims with loans and mortgages that comply with religious strictures prohibiting the payment or receipt of interest.
Islamic Bank of Britain will be the first fully Shariacompliant institution in the UK, but the venture will be able to tap into a vast and growing network of Islamic finance in the Gulf and the Far East, which is already involved in aircraft, property finance and government bonds. The pool of funds, estimated to be as large as $200 billion (108 billion) has already attracted UK institutions, such as HSBCs Amanah Finance, an Islamic bank within HSBC that is active in the Gulf and is already offering Sharia (Islamic law) mortgages to devout UK Muslims.



Iqbal Khan, head of HSBC Amanah Finance, said that the market for Islamic finance went beyond traditional Muslim centres in Bradford or Birmingham. What surprised me most when we did our marketing is that 400 to 500 people turned up to a meeting in Cardiff, he said.

Islamic banking is a recent phenomenon. The first institution launched in Dubai in the 1970s, was created to resolve a Koranic injunction that transactions based on riba (interest) are prohibited. Under Sharia, money is not a commodity and to make money from money is prohibited. Therefore Islamic banks do not offer interest on deposits but a profit share.

A range of investment techniques has evolved using the principle of sale and leaseback to allow Islamic financial institutions to provide mortgages and to finance assets, such as aircraft or equipment.

Nick Edmondes, a partner at Trowers & Hamlins, the law firm, said that Islamic banks were once a backwater but have become more sophisticated, engaging in commercial and trade finance such as equipment leasing. They are growing at a rate of 10 to 15 per cent per year, he said.

Within the past year Islamic institutions in the Gulf, have funded aircraft purchases worth $240 million, including two Boeing 777 aircraft for Pakistan Airlines and an Airbus A330 for Emirates.

Mr Khan pointed to another driving force, the huge Gulf pension funds, which are no longer content to hand over money to investment banks in London and New York. They are now making an allocation to Sharia banks. It is a corporate social responsibility movement by Muslims.

The pool of Islamic capital has even attracted foreign governments. In July the German state of Saxony-Anhalt became the first European government to issue a Sukuk, an Islamic bond. The 100 million (66 million) five-year floating-rate note was crafted to avoid payment of interest. Instead, borrowers received a rent from a series of government properties that formed the collateral for the bond.

I have no interest in IBB and have no advice to give either way.

Thought you might be interested in this piece in the Questor column (see this mornings Telegraph).

"Uphill for Islamic Bank of Britain

There are more than 2m Muslims in Britain who have until recently been ill-served by traditional financial institutions. The religion places strict conditions on the sort of products they can buy, not least banning the paying or receiving of interest.

Enter the Islamic Bank of Britain, which listed on Aim last August and is backed by a group of mainly Islamic shareholders, such as the Qatar International Islamic Bank. Yesterday, it announced a new financing arrangement that makes it the UK's only provider of "Halal" unsecured finance.

Competition has already emerged from more traditional institutions such as Lloyds TSB and HSBC, in addition to foreign banks such as Habib Bank. Unlike the western banks, though, IBB can claim to make no earnings at all from interest bearing products.

It does also offer some unique products, but there is nothing preventing rivals copying those that are successful. Added to which, IBB is not expected to be profitable until 2006 at the earliest. The shares yesterday finished down p at 36p. Even though the demographics look favourable, it has to be questioned what exactly IBB offers when blue chip institutions provide Sharia compliant products. There is little to recommend the shares. Avoid."

There are big differences here:
1. The name is represeantative.. "Islamic"
2. Islamic BB is backed by a group of mainly Islamic shareholders, such as the Qatar International Islamic Bank etc which will help with reputation among richer muslims.
3. Big banks eran through their non-Islamic products which makes it fundamental problems for restricted muslims to bank with them.

That's my though.

HSBC is also talking about Islamic products.
The main holders are Qatar Int Islamic Bank, DCD London & Mutual PLC, and Qatar Islamic Insurance Company.