In a bid to become a leading provider of Islamic finance in the UK, Lloyds TSB has become the first high street lender to offer current accounts and mortgages which comply with Islamic law through its 2,000 strong branch network nationwide. The bank has offered such products since 2005 but only in nine branches including a dedicated telephone service line. It will concentrate its main marketing push in about 100 branches in areas with a large Muslim population. Lloyds TSB has also announced plans to launch other Islamic financial products later in the year, including an Islamic student bank account.
The move by Lloyds TSB is also to compete with HSBC Amanah Finance, which currently leads the UK Islamic mortgage market, and also offers an Islamic current account, insurance and a pension fund. HSBC offers Islamic mortgages in 19 branches, as well as a dedicated team to visit potential customers at their homes.
Lloyds TSB's most recent move is understandable given the great potential of Islamic finance in the UK. According to the Office of National Statistics, there are currently 1.6 million Muslims in the UK. Many traditional financial services products are not suitable for Muslims as under Sharia law it is considered usury to pay or receive interest. In fact, Lloyds TSB research revealed in 2005 that over three-quarters of British Muslims want banking services that fit in with their faith, underlying the market's great potential.
While still a developing market, Islamic finance has come a long way in the UK. Mortgages were the first type of Islamic finance to become available. Though remaining small, the Islamic mortgage market is growing quickly.
According to Datamonitor, the Islamic mortgage market was worth GBP208 million in 2005, up from GBP36 million in 2001. In fact, it is Datamonitor's belief that Islamic mortgages are set to grow strongly, with gross advances set to be worth almost GBP1 billion by 2010.
Unsurprisingly, Lloyds is not the only lender to offer Islamic mortgages in the UK, with six other lenders present, including HSBC Amanah Finance, Ahli United Bank, West Bromwich Building Society, United National Bank, Alburaq Home Finance and the Islamic Bank of Britain. In addition, financial services providers have started offering other Islamic finance products, including a pension fund, a child trust fund, and a stock broking service.
Given the market's vast potential, Lloyds TSB is right to continue improving its Islamic finance proposition. By offering both Islamic mortgages and currents accounts on a nationwide basis, the lender is beginning to build up a core suite of Islamic products that will add to its reputation and position in this market. In addition, it will help in its bid to compete with current market leader HSBC Amanah Finance. 'End Intelliext
Sign up to our weekly newsletters for the latest industry news & comment.
back to top