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October - November 2004


Business Forum

Arab Banking Corporation and Bristol & West Pioneer Shariah-compliant Home Financing Scheme

Britain’s two million Muslims can now apply for a pioneering new home financing scheme which is both flexible and strictly in compliance with the provisions of the Shariah (Islamic law).

alburaq Shariah Compliant Home Finance, is based on the Islamic concept of Diminishing Musharaka (co-ownership or equity participation), and is now available via alburaq or at selected high street branches of Bristol & West.

alburaq is the brand under which the Arab Banking Corporation (ABC) is offering retail Islamic banking products to Muslims in the UK and globally. In May ABC agreed to provide Islamic home finance in the UK in partnership with the Bristol & West, one of the UK’s foremost mortgage banks. ABC’s alburaq brand is in fact emerging as one of the leading Islamic consumer finance suite of products in the world, comprising home finance, property finance for non-UK residents, buy-to-let, community projects, savings and investments, education finance, and consumer finance. The word alburaq conjures up sheer emotion and awe in many Muslims. alburaq, after all, is the winged steed that carried the Prophet Mohammed (pbuh) on his night journey from the Al-Aqsa Mosque in Al-Quds (Jerusalem) into the heavens to meet his creator. The name alburaq was chosen to represent many of the Islamic values which ABC wish to introduce, including trust (amanah), reliability, and stability.

For ABC, alburaq is "a journey to a new type of financial service, where Islamic principles are foremost and where education, honesty, and quality of service are key." With Bristol & West as a fellow traveller, alburaq has a pool of finance and access to a well-established and proven distribution network in the UK. The alburaq Shariah-compliant home financing scheme also brings together the best of British financial engineering and expertise and Islamic financial principles, which prohibits the charging and giving of interest (riba in Arabic).

This Shariah-compliant home financing scheme says Keith Leach, senior manager at ABC International Bank, is "tailored to the needs of the Muslim community in the UK," which today numbers almost 2 million, mainly from Pakistan, Bangladesh, India, Kashmir, Turkey, Morocco, and the Gulf states.

Julie Blunden, head of market development at Bristol & West, explains: "We have worked closely with ABC and their Shariah board for the past 18 months to ensure we provide a product which offers the strictest Shariah compliance and yet is modern and flexible and that will not place our Muslim customers at any financial disadvantage in comparison with conventional interest mortgages. Working with ABC has given us a valuable insight into the financial needs of the Muslim community in the UK. This relationship furthers our aim of ensuring that home ownership is accessible and affordable for anybody who wishes to purchase their own property."

Customers can get further comfort in the knowledge that ABC has a representative and independent Shariah (Islamic legal) Advisory Board, whose principal is Sheikh Nizam Yaquby, a noted Bahraini Islamic Fiqh (jurisprudence) scholar who also sits with the likes of Maulana Taqi Usmani and Imran Usmani on the Shariah Advisory Board of several major institutions globally. The ABC Shariah Board worked closely with alburaq to ensure that its provisions and conditions strictly adhere to the principles of Fiqh al-Muamalat (Islamic law relating to financial transactions).

ABC has successfully and intentionally combined the experience of Sheikh Nizam Yaquby, who also has a Masters in Finance from McGill University in Canada, with two home-bred British Islamic scholars, Mufti Abdul Kadir Barakatulla, Imam of the Finchley Mosque and Islamic Cultural Centre; and Mufti Mohammad Nurullah Shikdar, Imam of the Tunbridge Wells Mosque. In this way they bring together international experience and reputation; and knowledge with a local understanding.

According to Sheikh Nizam Yaquby, "the Diminishing Musharaka offers the most viable solution for housing finance. This particular contract has been successfully implemented by mortgage providers in the US, UK, and Pakistan." Under this mode, the financial institution and client jointly purchase the house. The ownership of the house is split between the bank and the customer; and it is agreed that the customer will purchase the share of the bank in the house gradually, thus increasing his own share until all the share of the Bank is purchased by him so as to make him the sole owner of the asset after a specified period. But during the financing period, the Bank’s share is leased to the customer who pays rent for using the Bank’s share in the asset. This contract, stress ABC International Bank and Bristol & West, offers an optimum mix of risk and return for the financial institutions.

The alburaq home financing scheme, which typically has a tenor of up to 25 years, offers two payment options to the customer. In the first option, the rent is fixed for an initial period of six months, and is then reviewed every six months. In the second option, the rent is fixed for an initial period of two years, and is then reviewed every six months thereafter.


The full version of this article is available in the print edition.

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