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The United Kingdom

One of the largest, most developed insurance markets in the world

UK ranks 3rd globally in insurance market size after the United States and China, and ranks first amongst the European markets with 23% of its market share.

The UK Insurance Regulatory Bodies

Prudential Regulation Authority (PRA)

  • It focuses on financial firms to stay stable and legally operational.
  • It is part of Bank of England, ultimately answerable via the British Parliament.
  • It is empowered to apply sanctions to businesses that fail to comply with their standards.

PRA is responsible for the regulation and supervision of financial firms such as insurance companies, banks, credit unions, building societies, and large investment firms. It ensures the safety and soundness of financial firms, as well as the stability of the financial system as a whole.

Financial Conduct Authority (FCA)

  • It focuses on preventing financial firms from making decisions that may harm consumers.
  • It is an independent body and is more of a watchdog.
  • It works in tandem with the PRA to protect innocent people using services across the UK.

The main role of the FCA is to help businesses deliver fair financial services to British consumers. Financial firms are required to follow its rules and standards, such as the conduct of business rules, disclosure requirements, and consumer protection regulations. It promote competition in financial markets by removing barriers to entry and encouraging innovation. It aims to ensure that consumers have access to a variety of products and services that meet their needs.

Some of the Most Developed Markets with Potential for Takaful

UNITED KINGDOM | FRANCE | GERMANY | CANADA | AUSTRALIA | NEW ZEALAND

There are other markets with takaful potential like Spain, United States, India and others but the logistics takaful start-ups are more complex

The domestic UK market is substantial and many multinational insurers operate within the country. Recent trends have shown increased mergers and acquisitions, digital transformation and focus on sustainability and ESG (Environmental, Social, and Governance) factors

Vibrant Islamic Finance Ecosystem

The UK has significant potential for the development and growth of takaful business within its vibrant ecosystem of islamic finance

The UK is a melting pot of financial innovation, particularly in promoting and supporting global Islamic finance and takaful initiatives.

It plays a crucial role in providing access to finance and protection for underserved consumers, such as through Shariah-compliant home and business financing, gradual homeownership, Waqf Investing, Compliant ETFs, digital banking, and student loans.

This vibrancy has positioned the UK at the forefront of the rapidly expanding Islamic FinTechecosystem. In 2021, the UK ranked 5th on the global Islamic FinTech Index, with 45 of the 68 Islamic FinTech companies in Europe headquartered in the United Kingdom.

UK’S global leadership in sustainable conventional and islamic finance

1. The UK ranks 10th globally in sustainability, aligning perfectly with the development ofIslamic finance in the country.

2. As of 2022, the UK ranks 27th out of 136 countries in the Islamic finance industry.

3. The UK is a global hub for sukuk listings on the London Stock Exchange and is the leading Western centre for Islamic finance. It was the first Western country to issue sovereign sukuks.

4. The UK is a leader in legal, accounting, and consulting services related to Islamic finance and is a prominent centre for Islamic finance education and training.

5. The Alternative Liquidity Facility (ALF), the first of its kind offered by a Western central bank, is a wakala-based, non-interest deposit facility. Participant deposits are backed by a fund of assets, providing returns, net of hedging and operational costs, to depositors.

Key Challenges for UK in Islamic Finance and Takaful

Addressing these challenges requires a coordinated effort from the government, financial institutions, and educational bodies to create a supportive environment for the growth of Islamic finance and takaful in the UK.

Regulatory Framework

Ensuring that the regulatory framework is conducive to the growth of Islamic finance while maintaining compliance with both Shariah principles
and UK financial regulations can be complex.

Despite its potential, Islamic finance still represents a small fraction of the overall financial market in the UK. Increasing market penetration and acceptance among mainstream consumers is a significant challenge.

Developing a diverse range of competitive and innovative Islamic financial products that meet the needs of various market segments is essential. This includes products for retail banking, investment, and insurance.

The UK faces competition from other global financial centres that are also looking to become leaders in Islamic finance. Staying ahead requires
continuous innovation and maintaining a competitive edge

Economic instability and political changes can impact the growth and stability of the Islamic finance sector. Ensuring resilience in the face of such challenges is crucial.

Islamic Banking in the United Kingdom

Fully Sharia-Compliant Banks

Gatehouse Bank
Bank of London and Middle East
Al Rayan Bank
Qatar Islamic Bank (UK)
Abu Dhabi Islamic Bank (UK)
Ahli United Bank (UK)

Conventional Banks and Building Societies

ABC International Bank
Bank of Ireland
BNP Paribas
Citi Group
IBJ International London
Royal Bank of Scotland

UBS
HSBC
Barclays
Bristol & West
Deutsche Bank
Lloyd’s Banking Group
Standard Chartered
United National Bank

Mutual & Friendly Societies

This is a friendly society operating in the UK, Canada and the US since 1834, offering conventional insurance and savings products. It introduced Shariah-compliant ISAs in 2019. Foresters’ products include the Shariah Stocks and Shares ISA and the Shariah Lifetime ISA. ISAS are Individual savings Accounts, offering tax-free income not available with standard savings accounts. These are offered widely by UK providers, including banks and investment firms.

Currently, other mutual and friendly societies in the UK are considering to introduce takaful products.

Islamic Fintechs in the United Kingdom

UK’s Islamic FinTechs have been successful in offering financial services to marginalised groups such as migrant workers or small businesses as well as to customers who have been using the traditional financial system and want alternative options.

Some Prominent Fintechs in the United Kingdom

United Kingdom

ROBO Advisory Home Finance Business Finance Crowd Funding Digital banking
Simply Ethical PFIDA IFG IGLOO KESTRL
Wahed Invest STRIDE UP NESTER EUREECA ALGBRA
Riba Free Foundation OFFA QARDUS YIELDERS RIZQ
WAYHOME FASSET.IO MNAARA NOMO

Non - UK

Insurance, Takaful, Pension
TIDAL
WAVES		 AZENTIO
PENFOLD TAKADAO

ROBO Advisory

  • Simply Ethical: Since 2009: Provides Islamic investment offerings, investing for retirement, real estate investing, compliant savings.
  • Wahed Invest: Since 2015 (U.S) and 2018 (U.K): Operates in 130 countries providing Islamic investment offerings, investing for retirement, real estate investing, compliant savings, Islamic ETFs, Waqf investing etc. It owns the UK digital banking called Niyah.
  • Riba free Foundation: A not-for-profit organisation, promoting financial literacy in riba-free transactions through training and coaching.

  • Pfida: Since 2016: Products and services to save and invest to enable home ownership.
  • StrideUp: Since 2017: Provides Shariah compliant home finance.
  • Offa: Since 2019 – Provides short-term Shariah compliant finance, enabling customers to invest in UK residential and commercial property.
  • Wayhome: Since 2019, (formerly UnMortgage): Gradual homeownership, starting with part-ownership with as little as 5% of property price and part-renting without getting a mortgage, enabling gradual payments to acquire more ownership until fully paid. It partners with Allianz Global Investors.

  • Islamic Finance Guru (IFG): Since 2014 – UK-based, provides Islamic finance learning platform, Shariah compliant investment and wealth management solutions through its platform Cur8 Capital. Also provides various other services like Islamic Wills and Zakat facilitator
  • Nester: Since 2018 – uses a platform that offers property financing solutions for buyers of UK property and then converts those financing arrangements into a simple secured investment.
  • Qardus: Since 2020 – the first ethical and Shariah-compliant peer-to-peer platform offering up to £200,000 in working capital to SME businesses.
  • Fasset.io: Since 2019 – provides exchange, investment and remittance in digital assets such as in cryptocurrency, stablecoins etc.

  • Kestrl: Since 2020 – offers personal Shariah compliant finance solutions. In 2022, they partnered with Bank Islam to develop and implement personal financial management features for its newly launched digital bank ‘Be U’.
  • Algbra: Since 2020 – based on ESG values, it operates as an electronic money institution, with product portfolio that includes debit and virtual card offerings.
  • Rizq: Since 2020: A digital APP connected to third parties to provide Shariah compliant solutions in investments, savings, financing and online payments.
  • Nomo: Since 2021 – Digital bank of BLME (Bank of London & Middle East). It facilitates access through its APP to a suite of state-of-the-art banking products, including daily banking, simple wealth management solutions, and new investment and payment products. It claims to be the world’s first Islamic international digital bank.

  • Igloo: Since 2006 – property crowdfunding platform that connects registered investors with below market value opportunities to begin their journey in property investment.
  • Eureeca: Since 2011 – Equity crowdfunding enables businesses to get funded and investors to build diversified Shariah compliant portfolios.
  • Yielders: Since 2015 – Crowd investing property platform that gives easy access to the United Kingdom property market and allows earning competitive returns. It has a unique ethical investment model where there are no mortgage, interest, debt or hidden fees.
  • Mnaara: Since 2022 – provides avenues to invest in growth and income funds for private funds, professionals, sophisticated investors and high net-worth individuals.

  • Penfold: Since 2016 – UK-based, provides pension savings plans funding for retirement through HSBC’s Islamic global equity index fund.
  • Tidal Waves: Since 2020 – Pakistan based, specialist insurance and takaful IT software provider including end-to-end SaaS platform.
  • Azentio: Since 2020 – Singapore-based, insurance software provider besides banking and investment software. End-to-end SaaS platform used by takaful companies.
  • Takadao: Since 2021 – Singapore based, but available in several markets. It provides mutual savings insurance through Digital Pooling using blockchain technology, enabling participants to mutually insure one another. It is not an insurance entity and therefore not under the jurisdiction of an insurance regulator.