More Non-Muslims Turning to Safe Haven of Islamic Finance; BANKING
Byline: By Anna Blackaby Business Staff
Growing numbers of non-Muslims are turning to Islamic banking as customers spooked by turmoil in the Western banking system increasingly see the sector as a safe haven.
The Birmingham-headquartered Islamic Bank of Britain said it had seen significant growth in non-Muslim customers since the onset of turbulence on financial markets as Islamic banks, bound by strict religious principles, are largely seen as insulated from the credit crisis.
Islam's prohibition on the charging or paying of interest, riba, as well as rules on the kinds of investments they can make are among the reasons Islamic banks are coming through the crisis unscathed.
Islamic Bank of Britain head of marketing Steven Amos said: "Our core business will always be Muslims but the numbers of non-Muslims are really picking up. We've had massive interest and it's down to the number of reasons why we're insulated from the credit crunch.
"There were two reasons for the credit crunch. The first is liquidity - banks lending to each other on the money markets - but Islamic banks do not borrow or lend on money markets because interest is not allowed.
"The second reason Islamic banks are insulated is to do with assets - everything has to involve an underlying asset or service and if you are going to trade in an asset you have to own it first."
The explosion in complex derivative products over the last few years has left Western banks reeling from exposure to toxic assets often far-removed from their everyday activities.
In contrast the more risk-averse Islamic finance system did not embrace this kind of deal.
"Conventional banks didn't know what they were buying in these derivatives but we have no exposure to sub-prime as we just don't deal in it full stop. That is one of the fundamental reasons we are insulated. …