How Effective Islamic Mortgage Market in the Uk Finance Essay

When I was started to write a report on how effective Islamic mortgage market in the UK, I was surprised that I have a very few knowledge about this subject being as a Muslim. It happened to most of the Muslims as it was described before and most of the Muslims do not know about and even keep confidence to go for the Islamic Sharia complaint products. One of the main principles of Islamic finance is Musharakah, profit-loss-sharing implication where if the bank makes a loss then the customer also have to share the loss. The Islamic financial institutes should take initiation to spread the knowledge and faith to all over the community both Muslim and non-Muslim as it is not like a religious activity and it may bring benefit in their financial life.

Currently Islamic Mortgage in UK is in the beginning level and in the growth situation as analysed in the previous chapters. Now Islamic banks in the UK act as financial intermediaries providing capital for home purchase, they are not dealing in properties. However, it is to be commended that conventional regulators, moving with times, are helping to create a level playing field for the Islamic finance industry. The UK financial regulatory body, the Financial Services Authority (FSA) has clearly mentioned that it is not favouring nor discriminating in regulating Islamic banks. Because of the different nature of contracts there are practical problems for Islamic banks. For this reason most of the Islamic banks use Sharia-compliant instruments such as murabaha, ijara and diminishing musharakah, but not Sharia-based like mudarabah and musharakah.

It was discussed in the previous chapters that the Islamic mortgage market remains positive, with all the Islamic financial lenders expending their business to attract more and more customers. The Islamic Bank of Britain remains competitive despite a loss in the last financial year and continues to develop its product portfolio by introducing new product home purchase plan, recently expanding its market out of the Muslim majority cities into the Scottish market. But the average Islamic mortgage customers will still have to pay more money to buy a home comparatively with the conventional mortgage for a property value of £150000. According to Sharia making money from money is called Riba, such as charging the interest, is usury and therefore it is not permitted. In order to be in Islamic Sharia complaint the mark-up cost or the marginal cost should be reduced so that general customers can be relieved from extra monetary burden.

Present situation indicates that many conventional bank who are involved in interest (riba) based business adapting and developing Islamic Sharia complaint products with a different window to attract a minority community Muslim which is a niche market or they can use the interest free "fair trade" and "ethical finance" to attract the all human being.

As it was shown, the UK can provide the highest numbers Islamic financial education providers in the world. These could be helpful to the people as well as the employees of the Islamic mortgage lenders. Same type of Islamic mortgage product are marketing in different rates by the different lenders where as Islam is the same to all believers. Difference in accounting standards and financial reporting standards should be resolved to get the transparency about the financial transactions. Many of the Islamic and the conventional providers’ online service is not clearly presented, so most of the people do not get the accurate rate and the calculation of lending expenses of the properties. It will make many people interesting about the product by providing uniform information and database materials by the Government departments and the Islamic financial institutions of the UK. There is a proposal to set up a central Sharia supervisory board in the UK in order to combine all the Islamic financial rules and instrument together. As the UK Islamic financial services industry is still very small compared to some other countries in the World, it would be more practical and cost effective for the Islamic financial institutions in UK to adopt the standards of the existing international standard setting bodies like Islamic Financial Services Board (IFSB), Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), International Islamic Rating Agency (IIRA), International Islamic Financial Market (IIFM) and Liquidity Management Centre (LMC).

Areas for Further Research

In this paper, I have presented "How effective Islamic mortgage market in the UK". The concept of Islamic mortgage, the growth, limitation of Islamic financial instruments and other relevant topics were discussed to get a conclusion. There are many other Islamic financial instruments and Islamic financial products like Sukuk (Bond) market which is another fastest growing Islamic product in the UK and another one is Takaful (Insurance) is not so much familiar with the general people of this country. There are some difficulties of Islamic finance to comply with the regulation, legal frame work, the financial reporting standards and audit & assurance of this country and different parts of the World. So in near future extensive, exclusive research and in-depth analysis may be taken to adapt these principles with the Islamic finance.

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How Effective Islamic Mortgage Market In The Uk Finance Essay. (2017, Jun 26). Retrieved June 23, 2021 , from
https://studydriver.com/how-effective-islamic-mortgage-market-in-the-uk-finance-essay/

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