Leicester Mercury

Muslim leaders have backed comments by a leading Islamic finance expert who said Sharia-compliant banking had been a "huge flop" in the UK.

Junaid Bhatti, part of the team which set up the Islamic Bank of Britain (IBB), which has one of its eight branches in Leicester, said Islamic products had been wrongly marketed by banks, which had over-emphasised the religious aspect.

These products are forbidden to charge, pay interest or be linked to the alcohol or tobacco industries.

The city is considered to be a hotspot for Sharia-compliant banking, mortgages and insurance due to its large Muslim population.

However, Mr Bhatti told Muslim Politics.com: "As we now approach the sixth anniversary of IBB's launch, I'm sad to finally have to admit that Islamic finance in the UK has been a huge flop."

IBB has not made a profit since it was founded in 2004 and last year saw losses rise to £9.5 million, compared to £5.9 million in 2008.

Mr Bhatti said that products created by the major banks had also failed to take off.

"Lloyds, which made a half-hearted stab at Sharia-compliant products in 2004, doesn't seem to have promoted its offering for years," he said in the article.

"Even HSBC Amanah, probably the most credible and efficient provider of halal banking in the UK, has dramatically reduced its dedicated Islamic banking staff in Britain, and its marketing volume has been turned way down."

IBB declined to comment.

HSBC said Sharia-compliant accounts were increasing at 10 per cent to 15 per cent a year. Lloyds said it no longer marketed its Islamic products.

Speaking to the Business, Mr Bhatti said: "What I am saying is that Islamic banks should appeal to customers in the same way as conventional banks do. Muslims want the same thing from their banks as non-Muslims do.

"It shouldn't be about saying 'we are an Islamic bank and by the way we provide a great service'. It should be the other way round."

Jaffer Kapasi, a Muslim who runs accountancy firm Kapasi & Co, of Belgrave, said Islamic products, such as mortgages, were difficult for people to understand, which may be putting people off them.

"I totally agree with Mr Bhatti," he said. "Some of the community are not happy with some of the terms and conditions associated with Islamic banking. It can be quite complicated."

Suleman Nagdi, spokesman for the Leicestershire Federation of Muslim Organisations, said many Muslims he had spoken to had doubts about whether banking products marketed as Islamic were actually 100 per cent Sharia-compliant.

"From the different people I've spoken to the question is still whether it is all 100 per cent Sharia-compliant," he said.

According to Maris Strategies, the global lslamic finance market rose to £553 billion last year, an increase of 29 per cent compared with 2008.

It said much of this can be attributed to a growing Muslim population wanting to invest according to the guiding principles of their faith. Leicester has more than 30,000 Muslims.

Jo Divanna, managing director of Maris Strategies, partly attributes the growth of Islamic finance globally to an effort by companies to widen their appeal by targeting non-Muslims.

He told the Financial Times: "Islamic finance is undergoing a rebranding towards western markets by reducing the use of 'Islamic' or 'Sharia' and focusing on the concepts of ethical and green."