London, Nov 29, IRNA , The British market for Shariah-compliant mortgages has failed to grow as fast as expected as many Muslims remain unaware or suspicious of products, according to the Financial Services Authority (FSA).
The FSA said in a new report on Islamic finance that the market had grown to only Pnds 500 million (Dlrs 1 bn) and was still dwarfed by the Pnds 1,100 bn value of mainstream mortgages.
The regulatory body said there had been expectations of much faster expansion in the market when the first banks began offering the products four years ago.
But it believed there is potential for the market to grow as banks open more branches offering a wider variety of Islamic- compliant products, where a form of rent contributes towards the payment of the property instead of interest being charged.
“The Muslim community is still unfamiliar with the product. There are only a small number of banks offering these mortgages and the types of products are limited,” said Michael Ainley, head of wholesale banks and investment firms at the FSA.
Ali Ravalia, part of the FSA’s capital markets team, said it was thought originally that the market could take off very quickly but that there was still the potential to grow.
The regulatory body stressed Britain was at the forefront of developing an Islamic finance market both on the high street with retail products and in the capital markets with the growth of Shariah-compliant bonds.
The UK is the only country in Europe that offers Islamic retail products, in spite of large Muslim population in France and Germany.
The London Stock Exchange (LSE) is also the only European centre where sukuk is listed.
The LSE has Pnds 4 bn worth of sukuk registered on its books compared with the global market, which has grown dramatically to about Pnds 80 bn, including 40 per cent up on the whole of 2006, according to the Financial Times.