In a landmark transaction within the UK’s Islamic finance sector, Offa, a Birmingham-based Islamic fintech firm, has acquired Bank of Ireland’s Alburaq Sharia-compliant home finance portfolio. This portfolio comprises over 350 home purchase plans, marking the first instance of a British financial institution purchasing an Islamic home finance book.
Offa, recognized for its swift and ethical property financing solutions, continues to expand its influence in the Islamic finance market through this acquisition. The deal not only underscores Offa’s commitment to providing Sharia-compliant financial products but also signifies a pivotal moment in the evolution of Islamic fintech services in the UK.
Background
Islamic finance operates in accordance with Sharia law, emphasizing ethical investments and prohibiting interest (riba). Instead, it utilizes profit-sharing and leasing arrangements to ensure compliance with Islamic principles. The Alburaq portfolio, one of the UK’s earliest Sharia-compliant home finance products, played a crucial role in introducing these principles to the British financial landscape.
Notably, members of Offa’s executive team were instrumental in the original distribution of the Alburaq portfolio nearly two decades ago. Their deep-rooted experience in Islamic finance has been pivotal in Offa’s growth and its ability to offer tailored, Sharia-compliant financial solutions.
The Acquisition
The acquisition encompasses more than 350 home purchase plans from Bank of Ireland’s Alburaq portfolio, marking a significant milestone as the first sale of an Islamic home finance book in the UK.
Offa’s strategic objective in this acquisition is to broaden its range of Sharia-compliant property finance products, thereby enhancing its service offerings to both existing and new clients. The firm collaborated with global law firm Norton Rose Fulbright to establish a Sharia-compliant funding structure, addressing tax legislation challenges that affect Sharia-compliant finance firms. This collaboration led to one of the first Sharia-compliant tranched private securitisations in the UK, marking a significant advancement in the country’s Islamic finance market.
Implications for Clients
The acquisition of Bank of Ireland’s Alburaq Sharia-compliant home finance portfolio by Offa brings significant benefits to the transferred customers. These clients now have access to a broader array of Sharia-compliant property finance products, enhancing their options for property financing in line with Islamic principles.
Offa’s commitment to ethical finance, which avoids charging interest and refrains from investing in sectors deemed harmful to society—such as alcohol, tobacco, and the arms trade—ensures that clients’ financial dealings align with their ethical and religious values.
Additionally, Offa’s recent launch of a buy-to-let service offers fast funding decisions through a modern, paperless process, aiming to disrupt and transform the traditionally cumbersome world of Islamic finance. This service employs the Islamic finance principle of co-ownership with leasing, allowing customers to gradually increase their share of the property over time.
Industry Impact
Offa’s acquisition marks a significant milestone in the UK’s Islamic finance sector, being the first British financial institution to purchase an Islamic home finance book.
This move underscores the growing demand for Sharia-compliant financial products and highlights the UK’s position as a leading center for Islamic finance.
The transaction also reflects the increasing appetite for ethical finance solutions among both Muslim and non-Muslim communities in the UK. Offa’s ethical funding model, which replaces interest with a transparent mark-up and avoids draconian measures if the borrower faces financial difficulties, appeals to a diverse clientele.
Furthermore, Offa’s collaboration with global law firm Norton Rose Fulbright to create a Sharia-compliant funding structure addresses tax legislation issues affecting Sharia-compliant finance firms. This partnership led to one of the first Sharia-compliant tranched private securitisations in the UK, marking a significant advancement in the country’s Islamic finance market.
Offa’s Vision and Future Plans
Offa aims to expand its Sharia-compliant financial offerings to meet the growing demand for ethical finance products in the UK. The company plans to introduce new bridging products in 2023, with projections to grow its assets portfolio to $1 billion over the next five years.
To support this growth, Offa has invested £1 million into its IT systems to develop an innovative end-to-end digital platform. This platform is expected to transform the way Islamic property finance is conducted in Britain, creating a tech-driven “faster, smarter, and easier” service for intermediaries and direct customers.
Offa’s vision includes leveraging technology to enhance customer experiences and streamline processes, making Sharia-compliant financial products more accessible and appealing to a broader audience. By aligning its services with ethical principles and modern technological advancements, Offa is poised to play a pivotal role in the future of Islamic finance in the UK.
Conclusion
Offa’s acquisition of Bank of Ireland’s Alburaq Sharia-compliant home finance portfolio marks a significant advancement in the UK’s Islamic finance sector. This strategic move not only enhances Offa’s service offerings but also provides customers with a broader range of ethical, Sharia-compliant financial solutions. By integrating modern technology with traditional Islamic finance principles, Offa is well-positioned to lead the evolution of ethical banking in the UK, setting a precedent for future developments in the industry.
