LONDON, 10 May 2004 — The launch in London last week of the AlBuraq suite of financial products marks the entry of one of the Arab banking majors, Arab Banking Corporation (ABC), into the Islamic retail banking market in the UK and Europe. It also underlines the impressive on-going growth of the global Islamic finance industry.

The flagship product of AlBuraq is ABC’s Islamic mortgage which is based on a diminishing Musharaka (equity participation) and Ijara contracts, drawn up by ABC’s legal adviser, Norton Rose, the City-based international law firm. The product will become available to the general market in the UK by July this year.

Due to an absence of a distribution network in the UK, and perhaps underlining its intent of taking the UK market seriously, ABC last week signed an agreement with the Bristol & West, one of the leading mortgage providers in the UK and part of the Bank of Ireland Group, to launch an Islamic home financing scheme “tailored to the needs of the Muslim community in the UK.”

The two parties are confident that with their combined experience — one in the field of mortgage provision and the other in Islamic finance — they will provide a competitive and flexible mortgage product that adheres strictly to Shariah-compliance. Indeed, ABC stresses that the “net cost of an Alburaq package will be broadly comparable to the cost of an equivalent (conventional) mortgage” thanks mainly due to the UK government’s decision to exempt Islamic Ijara and Musharaka mortgages from double stamp duty.

“The key role of ‘Group Head of Islamic Banking’ has been created at the center of ABC from which we will pull together our Islamic banking businesses and create a platform from which to take us up to a new level,” stresses Abdulmagid Breish, deputy chief executive & chief banking officer.

But the market perception was that of an Islamic finance strategy that was at best piecemeal and disjointed, with a clear lack of leadership. ABC Islamic Clearing Company was mostly servicing in-house liquidity requirements. ABC Islamic Bank, bereft of senior management responsibility for many years and underlined by the failure to appoint even a general manager, has failed to make its mark in the region. Muhammed BuQais who was finally appointed general manager about two years ago, has now resigned. A new general manager for ABC Islamic Bank will be appointed shortly and further appointments are expected as the restructuring takes hold.

Perhaps it was inevitable that the new strategy should coincide with the promotion of Breish to deputy CEO and chief banking officer of the ABC Group in Bahrain last year. Breish has come through the ranks over the years. As CEO of ABC International Bank in London, he has presided over one of the more successful entities in the group.

With his technocratic zeal, he has also turned his eye to the group’s Islamic finance activities, always aware of the rapid growth of the sector and the huge potential benefits and opportunities for the group. In Bahrain, he was appointed to the board of ABC Islamic Bank, and in London he approved the establishment of Islamic Asset Management Ltd., a wholly-owned subsidiary of ABC International Bank.

The entry into the UK retail market and the product category approach to Islamic banking at group level are both major challenges for ABC. The tie-up with Bristol & West is a major breakthrough for Islamic finance in the UK, and will inevitably see the market opening to other entrants over the next year or so.