History of Islamic Finance

The history of Islamic finance is surprisingly recent, stretching back globally only 35 years or so. In the UK, where the Islamic mortgage industry is said to be worth billions, the history of Islamic finance is even more recent than that.

For many decades Muslims in the UK have been unable to finance their businesses or homes without compromising their beliefs. There has been a marked lack of Shariah compliant finance solutions, and this has created problems in the finance industry and prevented many Muslims from home ownership.

In 2002 the Bank of England, recognising these obstacles, asked the high street banks to find financial solutions for Muslims. Until then only the United Bank of Kuwait and West Bromwich building society offered Islamic mortgages in the UK. Stamp duty, which is charged on any property sold, was another hurdle to home ownership. The way that Islamic mortgages are structured means any client wanting to purchase a property would end up being charged stamp duty twice, once when the property transferred to the bank from the seller, and again when the property transferred to the client.

In April 2003 Gordon Brown abolished double stamp duty on Islamic mortgages opening the way for more Muslims to own their own homes. Since then the UK has seen an emergence of high-class Shariah compliant mortgage schemes onto the marketplace, including the likes of HSBC's Amanah mortgage. Now the gates are truly open for ever more competitive, quality Islamic financial products and services.