ABC and Bristol & West agreed a deal in May to introduce Islamic financial products to the UK market.
Julie Blunden, head of market development at Bristol & West, said: “We have worked closely with ABC and its Shariah board for the past 18 months to ensure we provide a product which offers the strictest Shariah compliance. It has to be modern and flexible so as not to place our Muslim customers at any financial disadvantage in comparison with conventional interest mortgages.”
The Shariah prohibits Muslims from the charging and giving of interest. The preferred contract for alburaq will be Diminishing Musharaka; under this mode the financial institution and the client jointly purchase the house. The ownership of the house is split between the bank and the customer and it is agreed that the customer will purchase the bank’s share gradually, thus increasing the customers’ share until the bank’s entire share is purchased.
alburaq Shariah-compliant home finance, which typically has a tenure of up to 25 years, offers two payment options to the customer. In the first option the rent is fixed for an initial period of six months and is reviewed every six months. In the second option, the rent is fixed for an initial period of two years reviewed every six months. In both cases the property can be fully paid off anytime without incurring early payment penalties.
Keith Leach, senior manager at ABC, explained that the net cost of an alburaq package is broadly comparable to the cost of an equivalent mortgage. He said: “Our view is that the market is growing and, as more products become available, there will be more interest in Islamic home finance schemes and products.”
