News In Focus
24 April 2009
Islamic Bank launches Home Purchase Plan in Scotland
Islamic Bank of Britain has widened the choice of home finance options available to Scotland’s 60,000 Muslims, and non-Muslims looking for alternative ethical products, by officially launching its home purchase plan (HPP), which it says is the first Sharia’a compliant mortgage available in Scotland.
The new HPP contract is based on the principle of diminishing musharaka (partnership) with ijara (co-beneficiaries), which accommodates Scotland’s specific property and tenancy laws. Instead of paying interest on a mortgage, borrowers become co-owners with the bank. Their monthly payments are a combination of an "occupancy payment", a form of rental of the bank's share in the property, and a payment to buy out that share over the term of the loan.
A fixed rate of 3.99% applies until 30 June 2010, after which rates are reviewed quarterly.
Support for IBB’s initiative was received from Glasgow based Islamic Finance Council, with legal work by Scottish law firm Tods Murray LLP.
Sultan Choudhury, commercial director at Islamic Bank of Britain, said the plan "marks the end of the disadvantage Scottish consumers faced when seeking Sharia’a compliant, ethical home finance".
He added: “The home purchase plan also meets the demand from new homebuyers and existing home owners looking for alternatives modes of finance during the difficult times brought on by the credit crunch as Islamic Banking has shown itself to be a more stable alternative to conventional banking.”