Chicago-based Failaka International Inc, which is recognised as the industry leader in Islamic fund information, has said that it aims to better serve the growing needs of the Islamic financial marketplace by building an Islamic retail banking capablility for an undisclosed European offshore bank. Failaka, which also has offices in Kuwait, hopes that Muslims seeking online Islamic banking services will be able to use the service by early next year.
Negotiations are under way which would result in a new bank based on shariah, or Islamic law, which is expected to appoint a board of Islamic scholars to screen products and services. Islamic banking, also commonly known as interest-free banking, is built on basic ethical standards along with one key rule - Muslims are not allowed to pay or receive interest. Instead of a fixed interest rate on a savings account, Islamic banks offer a share of the bank's profit as a return on deposits or place funds in short-term commodities trading accounts.
The first private interest-free bank, the Dubai Islamic Bank, was set up in 1975. Two more private banks were founded in 1977 under the name of Faisal Islamic Bank in Egypt and Sudan. In the same year the Kuwaiti government set up Kuwait Finance House. Twenty-five years since the establishment of the first Islamic bank, more than 150 Islamic financial institutions have come into being. Today, the Islamic banking system manages over U$100bn and is said to be growing at 12%-15% annually. Global financial institutions have recognized this trend and are capitalizing on the attractive niche market. Some of the western banks that have established dedicated Islamic banking subsidiaries or have substantial dealings in the field include Citibank, Bank of America, Commerzbank, Deutche Bank, Merrill Lynch, ABN AMRO, BNP Paribas, Pictet & Cie, UBS, Standard Chartered, Barclays and HSBC.
A generation of younger, Internet-savvy Muslims has upped the demand for Islamic banking and financial services. It is exactly this market which Failaka hopes to capture with the proposed tie-up with an offshore bank. A survey this year of US-based Muslims found that approximately 62 per cent of respondents were investing a portion of their savings in a form that they considered compatible with Islam. Moreover, 57 per cent said the only reason they did not have Islamic investments was because they could not find any. Tariq Jamal Al-Rifai, the president of Failaka, said: 'The major finding was that many Muslims in the US tend to have higher-than-average education and above-average income but their knowledge of financial services is very low. Muslim migrants [to the US] tend to favour traditional investments - buy a home, buy a car or put your money in a savings or current account.'
Failaka's new project is known as www.albankalislami.com but the offshore bank involved cannot be named until an agreement to accept online deposits and lend in accordance with Islamic law has been finalised. The website domain name has been registered but no further details are available at the time of writing.
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