Securing the Future of the Islamic Finance Industry

This editorial was originally published in IFN.

The modern Islamic finance industry has grown exponentially since its inception around 50 years ago and is now one of the fastest growing sectors in financial services globally.[1] And, with the industry projected to grow from US$200 billion in assets in 2003 to over US$4 trillion by 2030, growth is not expected to slow down any time soon.[2] This trajectory clearly illustrates a wealth of opportunities for innovation and expansion as well as a strong demand for Islamic and other alternative finance products within the wider market. However, with this opportunity comes the need to support the industry and break down barriers which persist in the UK to ensure that Islamic finance can go on to achieve its full potential.

Reaching a Wider Audience

According to Gatehouse Bank’s Islamic and Ethical Finance Report 2024, nearly nine in 10 (88%) of UK consumers of the Muslim faith would consider switching to an Islamic finance provider, as would three in 10 (30%) people not of the Muslim faith.[3] Interestingly, over a quarter (26%) of consumers who do not follow the Muslim faith were unable to identify what the deterring factor in engaging with Islamic finance was for them, highlighting an opportunity for further education and a wider untapped market to explore.[4]

One way in which we can encourage those who would otherwise not have engaged with Islamic finance to see it as a viable alternative is to remove lingering misconceptions surrounding what it is and who Shariah-compliant products are for. Our research shows that, while there was an increased awareness of Islamic finance among UK consumers of the Muslim faith over the last five years, three in ten (30%) people still believe that Islamic finance is exclusively for those of the Muslim faith.[5] It is important that across the industry we are doing more to raise awareness that Islamic finance products are available to everyone, of all religions and none and that there are a number of reasons as to why it may be attractive to consumers, no matter what their beliefs are.

As an example of this, we believe that the intrinsic links between Shariah principles and ethical finance present a real opportunity for financial institutions to broaden their reach and cater to an increasingly ethically minded, environmentally conscious market. This is backed up by data from the Green Sukuk report published by Refinitiv, GEFI and the UKIFC, which found that green products are an entry point for a different market for Islamic finance.[6]

Our own research also backs this up, revealing that almost half (45%) of UK homebuyers would consider using an ethical finance provider that follows Islamic principles.[7] Furthermore, we found that just under two fifths (37%) of UK homebuyers would be most attracted to Shariah-compliant providers because they do not invest in unethical sectors, such as alcohol, tobacco, adult entertainment, gambling and the arms industry.[8]

It's not just home finance customers calling for more choice as savings customers increasingly prioritise ethical options too, even when confronted by challenges around the rising cost of living. According to a study we conducted in 2022, over half (52%) of respondents stated that they would review the ethical credentials of a savings account before committing capital.[9] The main difference between conventional savings products and Shariah-compliant savings products is that that they do not offer interest. Instead, providers such as Gatehouse Bank invest customers’ deposits carefully, with profits then being shared from the returns generated. This is known as the expected profit rate.

It's clear that the consumer interest for a more ethical alternative is strong which provides a great opportunity for us within the industry to further tap into this by making products and services that look and feel accessible to all.

Helping Islamic Finance to Grow

At Gatehouse Bank, we have been working closely with government and representatives from across the Islamic finance industry to ensure that Shariah-compliant finance is placed on a level playing field with conventional finance. In our most recent report titled, Striving for Growth: Fostering the UK’s Islamic Finance Sector, we not only identify some of the challenges facing the sector but include four key recommendations for the UK government to help unlock further growth while at the same time actively working with relevant parties to help these come to fruition.

These recommendations involve establishing a government-led Islamic finance taskforce, developing a cohesive UK government strategy, attracting new entrants to the market and fostering global collaboration on Islamic fintech. We believe that through this direct action and continued efforts to raise awareness of the benefits of Islamic finance for all, the UK can strengthen its position as a leader for Islamic finance in the Western world and continue to compete with its peers on a global level. Through comparing the UK market to other strong financial markets and analysing their approach to Islamic finance, we can see the critical role of policymakers and regulators in shaping the future of the industry.

1. British Embassy, Islamic Finance in the UK
2. Gatehouse Bank, Striving for Growth: Fostering the UK’s Islamic Finance Sector
3. Gatehouse Bank Islamic and Ethical Finance Consumer Report 2024
4. Gatehouse Bank Islamic and Ethical Finance Consumer Report 2024
5. Islamic and Islamic and Ethical Finance Consumer Report 2024
6. LSEG, Green Sukuk report from Refinitiv, GEFI and the UKIFC
7. Gatehouse Bank, “Almost half (45%) of UK homebuyers would consider using an ethical finance provider that follows Islamic principles, finds Gatehouse Bank.”:
8. https://gatehousebank.com/news/almost-half-45-of-uk-homebuyers-would-consider-using-an-ethical-finance-provider-that-follows-islamic-principles-finds-gatehouse-bank
9. Gatehouse Bank, Islamic and Ethical Finance Consumer Report: Islamic and Ethical Finance Consumer Report 2024
10. Gatehouse Bank, Over half of UK adults review ethical… | Gatehouse Bank plc