Giles Cunningham

Al Rayan Bank, a subsidiary of Qatar’s Masraf Al Rayan, is the UK’s oldest and largest Islamic bank. CEO Giles Cunningham spoke to John Everington about the growth prospects for Islamic Finance in the UK, the bank’s recent pivot towards commercial property and the prospects for new sharia-compliant banks launching in the UK.

Q: What is the outlook for the Islamic banking sector worldwide and for the UK in 2022?

A: We predict a 10–12% increase in the Islamic banking sector globally for the year ahead. It’s harder to judge what growth will be like in the UK, but if you include sharia-compliant deposit products, which are proving increasingly popular with both Muslim and non-Muslim customers, then you’re probably likely to see similar levels of growth.

Although Muslims account for around 30% of the world’s population, Islamic banking currently accounts for only 1% of total assets worldwide, so there’s really only one way that we see the market going.

Although Muslims account for around 30% of the world’s population, Islamic banking currently accounts for only 1% of total assets worldwide, so there’s really only one way that we see the market going.

Q: In February, Al Rayan announced a new strategic focus on the commercial property sector and premier banking. What is the attraction of these two segments?

A: Commercial property finance is an area that many of the Gulf banks are active in, as it’s a very good fit with sharia banking in particular, in terms of the structures of deals that can be offered. It’s a segment of the market that has been growing due to demand from both Muslim and non-Muslim clients. It’s been our highest growth area as we’ve been able to be very adaptable and offer quite flexible credit policies compared with the conventional big banks, and are thus able to turn things around much faster.

Having a parent company in the Gulf means that premier banking works well for high-net-worth Gulf clients that have strong links to the UK, spend time in the country and buy property. It means we’re able to help them meet their needs in the UK, including financing property purchases, providing a home for their savings and generally helping them navigate their way in the UK with their finances.

Q: Russia’s invasion of Ukraine has led to increased scrutiny of the dealings of Russian companies and investors in the UK and the property sector in particular. Is such scrutiny likely to create further opportunities for Gulf Co-operation Council (GCC) investors in the country?

A: Russian investors have definitely participated very actively in the UK property market for several years. It’s very logical that with Russian money perhaps not being so available, that Gulf money could well come in in its place. We’re certainly expecting to see an active bounce in GCC activity in the UK property market following the recent loosening of Covid-19 restrictions.

Q: Sharia-compliant neobanks such as Algbra have launched in the UK, targeting a wide cross-section of both Muslim and non-Muslim customers. Do you plan to pursue a similar strategy?

A: The market for sharia-complaint banking services in the UK is quite complicated. As the oldest and largest Islamic bank in the UK, we’ve pioneered the sharia-compliant retail banking concept in the country that has served us well since 2004. However, we have a retail customer base of around 37,000 retail customers, which is far below what a new market entrant would hope to gain.

It does beg the question of whether the market is really there for pure Islamic banks in the retail banking space. Our conclusion is that the growth is elsewhere; hence the shift in our focus more towards commercial property and to premier banking.

If you look at other areas of sharia-banking in the UK, such as the marketplace for fixed term deposits, there has been considerable growth. When sharia-compliant fixed-deposit products were first launched, there was a lot of scepticism and a lack of understanding, but today there’s a good level of acceptance of such products.

Q: How will the crisis in Ukraine and the surge in oil prices impact Al Rayan’s business in the UK?

A: We don’t see the crisis having any direct impact on what we do, given our focus on GCC clients and on the residential property developments that we finance. The secondary impact of course is still to be felt in terms of what it might mean for the UK property market going forward.

The rise in oil prices will probably, on balance, be a positive for us and for Masraf Al Rayan, as banks in the Gulf in general are strengthened by higher prices, with more wealth generated in Qatar and other countries in the region. We saw the opposite when oil prices fell to around $30 a barrel in early 2020, which saw changes in the amount of business from Gulf nationals in the UK.


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