Islamic banks are one of the few financial institutions who still have significant sums of money available to finance individuals and corporates, unlike their western banking counterparts, who will only continue to constrict their lending policies in light of the current economic crisis says the firm.
Dan Taylor, head of banking at BDO Stoy Hayward, says: “As the risk profile of Islamic Banks is generally lower than conventional western banks, this presents a more solid option for both retail and institutional investors and suggests that dealings with Islamic financial institutions will grow dramatically as people switch to more secure products in this environment.
“Further growth of Islamic banking in the UK will also be attributed to their more conservative approach to financing, as the risks are shared with the investor, much like the private equity model. In addition, it is more difficult for Islamic financial institutions to use leverage; therefore their risk profile is naturally lower.”
Currently 20 major global banks operating in the UK have set up units to provide Islamic Financial Services. They have been joined by five stand-alone Islamic banks. In comparison, Switzerland has five Islamic financial institutions and France and Luxembourg each have four.
Taylor says: “In light of the market turmoil, we could expect the number of stand alone Islamic financial institutions present in the UK to double over the next three years, further reaffirming London’s position as the pre-eminent centre of choice for the provision of Islamic Finance.”