Re: How Muslims make ends meet


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How Muslims make ends meet
Stephen Womack, Mail on Sunday
22 March 2006

BRITAIN'S 2m Muslims face an ethical dilemma when managing money. Current
accounts, credit cards, loans and mortgages
all involve the payment of interest - which is forbidden by the Koran.

Banks and building societies have woken up to the potential profits and
have been introducing products to bridge the
ethical gap. STEPHEN WOMACK reports on how 'Islamic finance' is changing
lives in one community.

Lloyds TSB, Melton Road, Leicester

RAIN lashes down on shoppers hurrying along the busy Melton Road. This
branch, just north of the city centre, is in the
heart of a vibrant Asian community.

Lloyds TSB has been offering banking products for Muslim customers for a
just over a year, gradually introducing them
across its network. The branch is one of 33 in Britain that now sell
Islamic current accounts.

Islamic law forbids both the payment or receipt of interest. So banks are
offering a range of products that offer loan
or partnership deals such as Ijara or Ijara with diminishing Musharaka.

Accounts have no overdraft facility and pay no interest on deposits. Money
is also ring-fenced from Lloyds TSB's other
assets.

Paul Sherrin, head of Islamic financial services for the bank, says: 'It
is important for our customers to see that we
are following the correct procedures. We have a panel of four Islamic
scholars who oversee the products. They offer
guidance on Islamic law and audit the products.'

In the past, Muslim families would have clubbed together to buy homes,
avoiding the need for a mortgage. But the
relentless rise in house prices has made this difficult, and left them
facing a stark choice between compromising their
faith or renting. Now Lloyds TSB is piloting an Islamic home finance plan
at the branch.

HSBC, Granby Street

CUSTOMERS Mohammad and Paula Ibrahim explain how the bank's Islamic home
finance plan has helped change their lives.
Paula and Mohammad, both 46, have just bought a house after 16 years of
living in rented properties. The couple
previously owned a home, but sold it in 1989 because they felt that paying
a mortgage was at odds with their faith.

Mohammad, a professor in Information and Systems Engineering at
Leicester's De Montfort University, says: 'You don't
want to be a hypocrite in your own home. Ultimately, the faith says you
can't buy money and we feel good about following
that teaching.'

Conventional mortgages involve borrowing and interest. Islamic plans work
around this by replacing the mortgage with a
leasing agreement. The bank becomes the legal owner of the property. It is
then bought back over a set term, say, 25
years. Each monthly payment is made up of rent for the property and a sum
that buys a proportion of the house. At the
end of the term, the property will have been bought outright.

The Ibrahims have five daughters, aged between 15 and four. Paula, a
teaching assistant, says: 'It will be good for the
children to have a place we can call home and to get that sense of
belonging.'

HSBC is developing the Amanah brand for all its Islamic products. As well
as the home finance plan, it offers a current
account, an Islamic pension and a home insurance plan. Hussam Sultan,
product development manager for HSBC Amanah, says:
'As a bank, we're not here to moralise or tell customers that Amanah
Finance is the way to please Allah. We're just here
to provide them with a choice.

LOCAL building societies pride themselves on meeting the needs of their
communities. The West Brom has been in Leicester
more than 40 years and is evolving as customers change.

Rani Banning, who is branch development manager, says: 'We try to make
ourselves an open and welcoming place. Our staff
speak five languages between them and customers know they can pop in if
they need help with forms or translation.'

Navuit and Chetna Sunderji have visited the branch to see Banning. Nav,
25, who runs a video production company, says:
'This is somewhere you feel welcome and it makes an effort to cater for
all kinds of customers.'

West Bromwich has just launched a Shariah Baby Bond, a child trust fund
account run in conjunction with The Children's
Mutual.

This gives Muslim savers the opportunity to invest the £250 the Government
has given to all children born after
September 1, 2002, in a way that is compatible with their beliefs. The
fund aims to track the performance of the FTSE
Global Islamic Index.

Nav, who lives in Evington on the outskirts of Leicester, says: 'It is
good to have different options that cater for
savers who are not allowed interest.'

The West Brom also offers Islamic mortgages, acting as a borker on behalf
of a panel of lenders.

THE final port of call. The bank opened its first branch in London in
2004, spotting a niche in the market to serve
British Muslims. The Leicester office was the third to open, in February
2005, and the bank now has seven branches
including sites in Manchester, Birmingham and London.

Sultan Choudhury, director of sales, says: 'We are the only British bank
to cater specifically for Muslim customers and
are halal from top to bottom.'

Set up by a group of investors, the bank is now listed on the junior Aim
stock market and has been developing a range of
products including current and savings accounts, a children's investment
plan and leasing schemes for car purchases.

Iqbal Lambat runs a DIY shop and a takeaway curry bar on the Cecil Road in
east Leicester.

Iqbal, 42, has opened one savings account with the Islamic Bank of Britain
and says he is 'testing the service' before
moving across the rest of his business from other banks.

His savings account does not pay interest. Instead, depositors give their
money to the bank, which then uses it for
other business activities that generate a profit. This profit is split
between bank and the investor.

In the longer term, most profits will come from financing purchases for
other bank customers. But in the short term,
deposits are used to buy contracts on the commodities market which, if
traded properly, yield a profit.

Iqbal's motivation in trying the new account is very straightforward.
'It's as simple as the chance to profit from
profit, not from interest,' he says.

'I was losing money to inflation before because there was not an
opportunity to save in conventional accounts. Now I can
at least have the chance of some return.'

.. For more information, call HSBC 0800 587 7786, hsbcamanah.com; Islamic
Bank of Britain 0845 606 0786,
islamic-bank.com; Lloyds TSB 0845 600 7786, lloydstsb.com; West Bromwich
Building Society 0845 456 7486, westbrom.co.uk.

http://www.thisismoney.co.uk/



Excellent read. I am sceptical about the exact mechanisms whereby the Bank
or the client convince themselves that no interest is involved.
I know some devout Muslims who do receive /pay interest .
Do devout Christians follow the whole bible?
An eye for an eye etc.



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