The Islamic Bank of Britain opened the doors to its first branch, in Edgware Road, London, today. While other banks offer individual products that comply with Islamic rules, this will be the first bank in the UK that operates wholly in accordance with Islamic sharia principles.
Under sharia law, all money must be invested in purely ethical industries, so the bank will not invest in any business involved with tobacco, alcohol or pornography, for example. Islamic law forbids the making of money with money, and giving or receiving of interest is forbidden. Similarly, money cannot be simply traded for money, Instead, profits can be made by the buying and selling of goods and services.
From today, the bank will be offering a range of savings accounts through its London branch, and will also offer access to the accounts across the country through postal and telephone banking.
Instead of paying interest on savings accounts, the bank will trade in investments which comply with sharia law. The profits from those investments will then be shared with savers.
The bank will offer current accounts and loans from November this year, and mortgages, credit or charge cards and small business banking will be available next year.
Further branches will be opened in Leicester and Birmingham in November, and there are plans to open eight more branches, plus an internet banking facility, in 2005.
Michael Hanlon, managing director of the Islamic Bank of Britain, said: "We are delighted to be opening our first branch. It marks a new era in Islamic banking in the UK and the beginning of our work to broaden our product offering and branch network.
"The current additional capital raising taking place will provide funds to allow us to implement these important growth plans, and we are confident that we can provide customers with a range of sharia compliant products and services. Our products will be equivalent to those available in a conventional bank and competitively priced," he said.
A supervisory committee, made up of a group of Islamic scholars, will ensure that the bank adheres fully to sharia principles. The committee will approve all services, activities and investments before they go on the market. The bank will also be regulated by the Financial Services Authority and will meet with UK banking regulations.