Islamic Finances

islamic bank of britain

The main modes of Islamic banking are known as murabaha, where a purchase is made by the bank and re-sold to the customer without any interest payments; musharaka, a partnership in which the rewards and risks - i.e. the profits and losses - are shared by both the bank and the customer in an investment; mudaraba, where someone places their investment in the hands of an professional who invests for them and shares the profit but doesn't bear the risk of any losses; and ijarah, a rental agreement made in order for the customer to receive goods, in which rental payments are made over a specified period and the bank reclaims the goods at the finish of it. 
Lots of of the high street banks offer Islamic products, and there's some Middle Eastern banks with branches in the United Kingdom that provide financial products and services suitable for muslims.

Trust funds

The government introduced kid trust funds in 2005 to help new parents to start saving for their kid's future. On the birth of a kid, they are given £250 in vouchers to invest on their behalf, and an additional £250 on the kid's seventh birthday. Additional contributions of up to £1,200 can be made yearly, and the money can be invested in savings accounts or in stocks and shares, or a mix of both (a stake-holder account).

islamic bank of britain

A Sharia-compliant kid trust fund is also available for the children of Muslim families, and is provided by the Kid's Mutual. It is a stake-holder account, which invests in the stock market until the kid turns 13 and then transfers the funds in to a savings account or lower risk investments such as government bonds. This aims to reduce the impact of any stock market slumps in the run-up to their 18th birthday. All investments are made in funds that don't compromise Islamic principles, and no interest is paid on the savings.

As mortgages are interest-charging loans, they are not thought about acceptable to the Islamic faith. However, as most people cannot afford to pay money to buy a property outright, there is a demand for Sharia-compliant mortgages among the Muslim community. Lots of high street banks now offer such products, as does the Islamic Bank of Britain. An Islamic mortgage normally works by means of ijara, a leasing agreement in which the bank purchases the property on behalf of the customer and charges rent to them (including a handling fee) until the acquisition cost is repaid, at which point the customer owns the property outright. As with other mortgages, the bank retains the rights to the property until this point.

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Mortgages

To comply with the Islamic faith, bank accounts ought to neither charge nor pay interest. This normally means that there will be no overdraft or credit card facilities on current accounts, and that savings accounts invest money to make a profit than receive interest on it.

Bank accounts