There are concerns about the future availability of Islamic finance in the UK after Al Rayan Bank announced it would be withdrawing some of its Home Purchase Plan (HPP) products.
The bank, which is the major provider of Islamic finance in the UK, confirmed to 5Pillars that from Monday it would be withdrawing “some of its lowest deposit Home Purchase Plan (HPP) products.”
It also announced the resignation of Simon Moore as Chairman for unexplained reasons. A new chairman will be confirmed in due course.
“This decision is largely driven by current market conditions and is in line with similar approaches taken by many other UK home finance providers. This will not impact existing customers or new customers looking for higher deposit HPP products,” the bank said.
The Al Rayan announcement came a few days after sources told 5Pillars that it would be closing, or drastically reducing, the retail part of its business which would have far reaching negative consequences for UK Muslims and generally for Islamic finance in the UK and beyond.
A source said: “Closing down retail means the withdrawal of critical banking services for faith-led UK Muslims. Al Rayan Bank is the only provider of UK sharia compliant current accounts in the UK and this is a matter of significant public interest.
“If Al Rayan Bank withdraws from providing retail services this will severely impair the ability of Muslims to open Sharia compliant current and savings accounts for their day to day financial needs as well as limiting the availability of products that allow them to purchase their homes in a halal way.
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“For the last 16 years the bank has led the way in offering these services to Muslims across the UK. The success of the bank where it has grown to over 80,000 customers and is making profits has been due to the foundation laid down by the retail banking customers. In these challenging times to remove services for these customers is the wrong thing to do on so many levels.
“It does not make commercial sense as not only is it a profitable market with a lot more potential for growth, it is already the most profitable part of the bank. It is wrong from a social inclusion point of view as tens of thousands of retail Muslim customers will be financially and economically excluded.
“The key reason the UK led the way in granting the first Islamic Banking Licence in the Western World to Islamic Bank of Britain (subsequently Al Rayan Bank) was to promote financial and social inclusion for many unbanked Muslims who were eschewing the formal Banking system for faith reasons.
“If these services were to be withdrawn there is the risk that funds would then enter the cash economy again with the risks that this entails. It is also wrong from an ethical point of view as these are the customers who need these services the most so that they can manage their financial affairs according to their faith, however, now they will be denied this opportunity.
“This will be a huge betrayal of those customers and a betrayal of the reasons why the Bank was granted a Banking licence in the first place Carrying a banking licence entails responsibilities for which they were granted that licence – it is not a licence to act purely for the benefit of shareholders and in this case where the Bank has no significant competition it is a matter of serious public interest.”
5Pillars put the above points to Al Rayan and they responded: “In line with the Bank’s policy, we will not comment on speculation, except to state we are constantly reviewing both our risk appetite and our strategy, particularly during a rapidly evolving situation such as the COVID-19 pandemic.”
Al Rayan has recently closed many of its retail branches and has sent letters to charities about withdrawing the ability to send international payments outside the EU, which will make it very difficult for them to operate.
Founded in 2004 as the first Islamic retail bank in Europe, Al Rayan Bank currently serves more than 85,000 customers, over a third of whom are believed to be non-Muslim.
With an asset book of almost £2billion, Al Rayan Bank is today the UK’s largest Islamic bank and provides Islamic finance to many thousands of Muslim households in the UK.