The UK’s first digital Islamic bank in the works

A young start-up has begun the process of setting up a digital Islamic bank in the UK, with eyes on formally launching in 2018.

Like most start-ups, the idea behind a 100% Shariah compliant and 100% online bank was born out of a conversation. Hassan Wakar, a young student entrepreneur at Kingston University, took the conversation to another level and set up Ummah Finance, with the sole ambition of transforming the way Muslims (and non-Muslims) in the UK bank.
Jumping into it in October 2016, the company, with a seed capital of GBP200,000 (US$258,944), is now in the early stages of technology development, designing and testing back-end systems as well as core banking systems with a view of developing a mobile application embedded with know your customer and anti-money laundering functionalities, following the successful testing of its web platform.

The idea of an Islamic digital bank is not new: in fact, at the time when Ummah Finance was setting up back in 2016, Abu Dhabi Islamic Bank forged a partnership with Germany’s Fidor Bank to introduce the GCC’s first community-based digital bank.
But what makes Ummah Finance an interesting proposition in the UK context is that it is focusing on serving the retail market; most of the six fully-fledged Islamic banks in the UK focus on the wholesale market.

Speaking to Hassan, the founder shared that the proposed bank will first roll out basic current and savings accounts before moving into investment products as well as mortgages, with an intention to also broaden its product suite to include wholesale instruments.

While Ummah Finance may be tech-ready (seen), however, regulatory hurdles remain. Like fellow challenger or digital banks in the UK such as Atom, Starling, Monzo and Tandem, Ummah Finance will need to secure approval from the Financial Conduct Authority and Prudential Regulatory Authority which could take about a year based on the experience of incumbents; however, unlike the existing players, Ummah Finance will also need to secure the approval of an external Shariah council (along with internal Shariah controls), which may consume more time and costs.

“Licensing is, by far, the most difficult part of our journey,” notes Hassan.

However, Hassan is optimistic that if all goes well, the Islamic digital bank will be able to capture about 3% of the Muslim population in its first year of operations: 100,000 out of the approximately three million currently residing in the UK.


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