The first, and only, fully-fledged Shariah compliant bank in Australia has surrendered its restricted banking license to the Australia Prudential Regulation Authority (APRA) due to struggles in raising the capital needed to maintain the hard-earned license, the neobank confirmed.
Islamic Bank Australia (IBA) made history in July 2022 when it secured the regulatory go-ahead to operate as Australia’s first Islamic bank, and a digital one at that. This had been an arduous and long journey for the challenger bank, over a decade in the making: it began engaging APRA in 2012 to navigate the Australian regulatory environment in the absence of a dedicated Islamic finance law. Throughout the years, the group — backed by the UAE’s Abreco Group — faced significant hurdles including a moratorium on new banking licenses in 2020 during the COVID-19 pandemic.
“We understand the anticipation and excitement surrounding the launch of the first Islamic bank in Australia. The journey thus far has been one of passion, dedication and unwavering commitment to providing Islamic financial services to our community. However, the current capital market conditions have proven to be exceptionally challenging at this stage of our endeavor,” IBA, now rebranded as Islamic Money, said. Only licensed entities can use the word ‘bank’ hence the new name.
Restricted deposit-taking institution licenses can only be held for two years prior to progressing toward an authorized deposit-taking institution (ADI) license. Restricted ADIs need to maintain a minimum capital of the higher of: AU$3 million (US$1.96 million) plus a resolution reserve, which is typically set at AU$1 million (US$653,544); or 20% of adjusted assets.
Islamic Money emphasized that it did not breach any licensing conditions. “As soon as it became apparent that a breach of capital requirements could not be avoided, APRA was notified and we voluntarily requested revocation of our license. This is in line with the ethical nature in which we run our business,” it said.
But this does not spell the end of the journey for Islamic Money.
“We are working hard to determine how we can continue this journey for the community and pursuing various options to enable us to raise the necessary capital to reapply for our banking license in future and become Australia’s first Islamic bank,” it said.
APRA confirmed in a statement that IBA’s decision to revoke its ADI license does not prejudice any future application it may make for a restricted ADI or ADI license.
At the time of revocation, IBA, which was acquired by Hejaz Group in June 2023, was still building and testing its products and systems; it had not launched any products nor accepted any deposits nor onboarded any customers.