THE royal family of Qatar is putting its financial muscle behind Britain’s first Islamic bank, which yesterday confirmed plans for a £40 million public offer and flotation on the AIM market in London.
Islamic Bank, the first banking institution in the UK to be fully compliant with Islamic law, secured its licence from the Financial Services Authority at the beginning of August and expects its shares to be trading from October 12. Bank branches are planned for Edgware Road, London, and Birmingham.
The flotation and share issue will boost the bank’s £14 million seed capital. Its capital was raised two years ago, mainly from the Qatari royal family, who control more than 40 per cent of the existing share capital. The bank’s largest shareholder, with 17.4 per cent, is the Emir of Qatar, Sheikh Hamad Bin Khalifa Bin Hamad al-Thani.
The bank’s founders, including the Qatar International Islamic Bank and Al Baraka Banking Group, are being offered the opportunity to maintain their interest in a private placing. At the same time, UK private investors will next week be able to subscribe on the bank’s website for shares at the placing price of 25p a share. At the issue price, the share offering will put the bank’s worth at £105 million.
Islamic Bank will comply with the Koran’s prohibition against the payment or receipt of interest. Instead of receiving interest, Islamic bank depositors are usually offered a profit share in the bank. Muslim scholars have devised elaborate transactions, involving the principle of sale-and-leaseback, to provide products such as mortgages which do not fall foul of Islamic law.
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A major hurdle to the launch of Islamic Bank was overcome last year, when the Parliament amended the rules on stamp duty to allow Islamic mortgages to escape a double tax trap where the bank purchases the property and resells it to the borrower.
The new bank is targeting a market estimated to consist of 1.8 million UK Muslims, as well as the large number of summer visitors to the UK from the Middle East.
Islamic banking is growing rapidly in the Gulf’s financial centres, prospering from a growing pool of funds fed by the high oil price.
REFORMIST
Oil and gas have made the fortunes of the al-Thani family who have ruled the tiny desert state of Qatar in the Arabian Gulf for almost 150 years. The Emir, Sheikh Hamad Bin Khalifa al-Thani, above, seized power from his father in a coup in 1995 and brought in liberal reforms which led to the creation of Qatar’s satellite TV station — al-Jazeera — the Middle East’s most influential broadcaster.