LONDON — On a recent Friday afternoon, the Islamic Bank of Britain (IBB) branch in West London was bustling with a large number of customers, including non-Muslims.
At a time many conventional banks have gone bust in the credit crunch and financial crisis, the IBB is reporting a growth of 5 percent in customer numbers and 13 percent in customer financing.
The reason is that the bank "has been better protected from the credit crunch affecting mainstream banks," Sultan Choudhury, the commercial director at the IBB.
A financial crisis swept the US last month after the collapse of Lehman Brothers, the fourth-largest investment bank, and the financial woes of a number of Wall Street giants.
This triggered a domino effect across the world leaving conventional banks, lending each other on the money markets, short of credit.
Western government have since pumped billions of dollars into their troubled banks to keep credit flowing and prevent a complete financial meltdown.
The British government recently unveiled a massive the £37bn bank bailout of taxpayer' funds to rescue Lloyds TSB, HBOS and Royal Bank of Scotland from liquidity shortage.
Choudhury said the IBB does not take interest-based loans from other banks, and has high quality, asset-based investments.
"That means that the bank avoided the instability the other high street banks have suffered," he explained.
Islam forbids Muslims from usury, receiving or paying interest (known as Riba) on loans.
Transactions by Islamic banks must be backed by real assets -- not shady repackaged subprime mortgages.
Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.
Investors have a right to know how their funds are being used, and the sector is overseen by dedicated supervisory boards as well as the usual national regulatory authorities |
