New report outlines key recommendations to position the UK as a global hub for Islamic finance
Gatehouse Bank, a Shariah-compliant UK challenger bank, has released a report urging the government to introduce measures aimed at fostering growth in the Islamic finance sector. The report outlines four key recommendations designed to align Islamic finance with conventional financial services.
What is Islamic finance?
Islamic finance is a way of managing money and doing business while adhering to the moral principles of Islam. It operates on the principle that money holds no intrinsic value and should only facilitate the exchange of goods and services. Earning money from money, such as through interest, is avoided. It also prohibits investments in harmful industries like alcohol, tobacco, and gambling. Emphasising partnership, it encourages profit and risk sharing between individuals and businesses. Islamic finance products are available to everyone, regardless of faith.
Islamic finance is experiencing rapid global expansion, with assets forecast to grow from £140 billion in 2003 to £3.2 trillion by 2030. In the UK, consumer demand is strong, with previous research from Gatehouse Bank indicating that 88% of Muslim consumers and 30% of non-Muslim consumers would consider switching to an Islamic finance provider.
Steps to enhance Islamic finance
The report draws comparisons from markets such as Australia, Canada, the EU, the UAE, Africa and the US, and suggests the following actions:
- Government-led Islamic finance taskforce: A dedicated taskforce should be established to explore growth opportunities, including attracting foreign investment and promoting sustainable finance alternatives.
- Reducing market entry barriers: The government should encourage new Islamic finance providers by addressing obstacles such as expanding the Bank of England’s Alternative Liquidity Facility.
- Coherent national strategy: A unified government approach to Islamic finance is needed to ensure alternative financial products are considered when drafting policies and legislation.
- Promoting global Islamic fintech partnerships: Strengthening international collaboration in Islamic fintech could drive further growth in the UK’s already robust market.
The UK’s Islamic finance sector is expected to grow by 16.5% in the next five years, increasing from £6.1 billion in 2024 to approximately £7 billion by 2029. Another research from Gatehouse Bank showed that awareness of Islamic finance among Muslim consumers in the UK has increased from 77% in 2019 to 90% in 2024.
With more than 20 financial institutions, including five fully Shariah-compliant banks, the UK offers more Islamic finance options than any other Western country. The nation also hosts the largest number of Islamic fintech firms outside the Middle East, positioning it strongly to become a global leader in the sector.
“Our research shows that the UK is already well-placed to become the Western capital for Islamic finance,” said Charles Haresnape (pictured), chief executive of Gatehouse Bank. “However, achieving that goal requires a government commitment to placing alternative finance, including Islamic and ethical finance, on a level playing field with conventional finance.
“The development of Islamic finance is not just a niche within the UK’s financial services sector – it is a marker of the country’s ability to foster ethical innovation and inclusive growth. Ultimately, strengthening the UK’s Islamic finance sector will attract international investment and enhance financial inclusion, ultimately driving innovation and competitiveness in the wider financial services sector.”
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