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:: You are here: > Islamic Mortgages / Halal Mortgages > Knowledge > Shariah debate > Research and Reports > Islamic Finance
Robin Matthews / Issam Tlemsani / Aftab Siddiqui - Centre for International Business Policy, Kingston Business School. (Below we give an overview of their main findings and report - for a full report please contact - I.Tlemsani@kingston.ac.uk , Tel/Fax: 0044 208 547 8674).
Introduction
Islamic banking is a growing phenomenon, which came into existence to satisfy the financial needs of devout Muslims (1.6 billion Muslims around the world) who observe the prohibition of Riba (usury). Many economists1 have studied the macro-economic properties of banking institution in the framework of an isolated and ideal Islamic economy. In the age of integrated global financial markets, the instantaneous transformation of an entire financial sector to profit-and-loss sharing is very unlikely: so what is the outlook for Islamic banking?
UK Shariah Compliant Market AnalysisGeographic Distribution of Muslims in UK
The distribution of Muslims in the UK falls into a number of well-defined regions in the South (London, Luton and Slough), the Midlands (Birmingham and Leicester), and the Pennines (Manchester, Lancashire, Leeds and Bradford), as well as smaller centre in Glasgow, Cardiff/Bristol and Bath. In some heavily populated areas, such as Leicester and Luton, for example, up to 20% of the population is Muslim.
Indeed, Leicester is set to become the first ever 'Islamic City' in the UK, within the next decade, as the Muslim population rises to above 50%; i.e. an 'ethnic majority'. Much of the Muslim population is centred on the South East of England, in Slough, and in North, West and Central London. Datamonitor estimates that 8% of the population in Greater London is Muslim, amounting to approximately 725,000 persons. This means that over 40% of the Muslims in the UK live in the Greater London area.
Muslim Population ProfileUK Mortgage Products PotentialConclusion
Islamic principles of interest are concerned with issues of fairness and justice rather than efficiency narrowly defined. These principles focus on the necessity of sharing risk in a fair and stable society, and upon problems of exploitation in markets where power is asymmetric this is the real Riba (usury) issue.
Our case analyses shows that the principles differences between Islamic and conventional housing finance is that the former is equity based and the latter is debit based. In an Islamic mortgage situation both the bank and the client share ownership [equity] and therefore share the risk of equity ownership. In conventional banking the client owns all the equity and the banks loan to the client is secured on the value of the property.
The Islamic approach emanates from a foundation set of ethical principles. So discussion of Islamic finance in connection with global financial practices introduces an ethical dimension that is welcome. Also as Khan (2002) points out an Islamic system of finance might create a more stable world financial market.
