‘Regulations and higher interest rates favour big banks’, says Sultan Choudhury at Mansion House Islamic Finance forum

Europe’s largest annual Islamic finance event, the Islamic Finance Network (IFN) UK Forum, took place at London’s majestic Mansion House on Monday 4 September.

Held under the patronage of the Lord Mayor of London and supported by the British Government and the City of London, each year this one-day event brings together the top names from the world of banking and investment, as well as intermediaries and service providers, to discuss the key issues impacting Islamic finance and the halal economy.

Offa’s Executive Chairman Sultan Choudhury OBE was a speaker on the first panel discussion of the day, which focussed on ‘UK Islamic Finance’s Comparative Advantage — Developing Financial Architecture to Ensure Continued Competitiveness’.

Mr Choudhury appeared in his role as an Advisory Board Member of the Islamic Finance Council UK, alongside fellow panellists Arshadur Rahman, a Senior Manager at the Bank of England, Dr Mohamed Damak, a Senior Director at S&P Global Ratings, Dr Usman Chaudry, Gatehouse Bank’s Chief Risk Officer, and Zakky Bantan, the Head of Funding at Islamic Development Bank.

Chaired by IFN managing editor Vineeta Tan, the panel was asked to consider how UK financial architecture should evolve to better support new Islamic financial services, while ensuring the UK builds on its competitiveness as a global Islamic finance hub.

The panel also discussed how Islamic finance in the UK can help improve public-private sector funding for SMEs, start-ups and early-stage businesses, and how to encourage the expansion of core Islamic retail financial services, such as savings, pensions, Takaful (Islamic insurance) solutions, and student financing schemes.

Commenting on the current financial climate, Mr Choudhury said that interest rate increases primarily “benefit” the big banks “at this stage of the cycle” while “non-bank financial institutions” have seen their “funding costs go up”, which has “put a lot of squeeze on their ability to compete with banks.”

The Offa chairman added that financial regulations are tipped in favour of the banks, which he said was “understandable” given their significance to the industry. He outlined some of the challenges non-bank lenders faced, such as Stamp Duty, Capital Gains Tax and Consumer Credit Tax, which have “stifled the development of personal finance products [and] car finance” in the Shariah-compliant market.

Despite these factors, Mr Choudhury said he saw “opportunities”, especially with more banks and institutions turning to Islamic finance experts, but he felt “there is a lot of work to do” to overcome the conditions that are “disadvantaging Muslim businesses” in Britain.