In 2016, the number of applications for Home Purchase Plans (HPPs) and Buy To Let Purchase Plans (BTLPP) from Al Rayan Bank reached a record high.
Demand for Islamic home finance is growing according to Al Rayan, which is currently the UK’s largest Sharia compliant bank. Having measured demand by the volume of eligible bank enquiries received, demand grew by 9% during 2016 and over the past five years has risen by 99%.
Commenting on the figures was Keith Leach, the bank’s chief commercial officer. He highlighted the accessibility of the products for all faiths as well as the growth in Islamic banking.
“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.”
The products available from Al Rayan – HPPs and BTLPPs – are shared ownership agreements which do not involve interest.
For the majority of Muslims, interest is prohibited as money is a medium of exchange and should therefore not be able to give rise to more money. In turn, they believe this will create financial unfairness within a transaction and ultimately result in societal financial unfairness in general.
With the bank as partners, Al Rayan’s customers will purchase their property, slowly acquiring the bank’s share through monthly payments. In order to use the half of the property they don’t yet own, rent pay may be paid.
The value of Sharia compliant savings offered by the bank has similarly risen in line with the growing demand for Islamic home finance. Islamic savings – ethical profit sharing agreements which also avoid interest – increased last year by 47% compared to the year previous and by 449% in comparison with 2012.
According to Al Rayan, a significant proportion of the growth has been down to customers who are not of the Muslim faith. They estimate that 26% of customers who choose to bank with it in general and 94% of the fixed term deposit customers who joined last year are not non-Muslim.
