Islamic banking gets the nod in Australia
Islamic banking continues to see increased adoption by more countries and banks around the world. The International Monetary Fund (IMF) defines Islamic banking as a financial activity that is Shariah-compliant and applied through the development of Islamic economics.
According to Mordor Intelligence, Islamic banking is the largest sector in the Islamic finance industry, contributing about 69% to the industry’s assets. In 2019, there are 526 Islamic banks, although the number would be significantly higher now. The top three markets of Islamic banking were Iran, Saudi Arabia, and Malaysia.
Now, Australia has licensed its first-ever Islamic bank, the Islamic Bank of Australia (IBA). IBA will be the first Australian bank to offer a full suite of retail and business banking services – all without interest and Shariah-compliant for the first time in Australia.
After obtaining a Restricted Authorised Deposit-taking Institution (Restricted ADI) authorization from the Australian Prudential Regulation Authority (APRA), IBA can now build its systems, implement processes, and test with a small number of customers in 2023.
While IBA is not open for business yet, the license by APRA shows the growing global acceptance of Islamic finance around the world. In fact, Islamic banks are growing rapidly all over the world and offer fundamentally different banking products without interest. This includes home finance with co-ownership, and savings accounts that pay profit-share.
For Dean Gillespie, IBA CEO, with the number of Muslims in Australia growing by more than 6% every year, IBA is excited to be bringing this new type of banking to the Australian community.
Australia’s Muslim population grew from 2.6% in 2016 to 3.2% of all Australians in the recent 2021 Census. Nearly a million Australians identify as being of the Islamic faith.
“Islamic banks are incredibly popular worldwide because of the ethical way they interact with customers. It’s more like a partnership where both the bank and the customers share the benefits,” commented Gillespie.
Islamic Bank Australia will first launch retail/personal banking with an everyday bank account, savings product, and home finance, before moving into business banking after a full license is received.
Gillespie also said that Islamic banks were inherently ethical, refusing to deal with certain industries.
“We won’t bank gambling companies. We won’t bank big tobacco. We won’t bank alcohol companies. We will support charitable organizations for the greater good. We have already started this journey by planting trees and fighting homelessness. We’ll do everything we can to be a fantastic community bank that customers will be proud of. Islamic Bank Australia is an inclusive bank – you won’t have to be a Muslim Aussie to bank with us,” added Gillespie.
Meanwhile, Islamic Bank Australia’s Chair, Anthony Wamsteker, said, “this is a big milestone for Australia as it provides choice, introduces diversity in Australian banking products, and provides financial inclusion for the Islamic community.”
Products at Islamic Bank Australia will be endorsed by internationally renowned Islamic scholars to ensure they are Shariah-compliant. Gillespie also pointed out that IBA will be building an incredible digital experience for its customers.
IBA Group was originally founded by thirteen passionate Muslims who wanted to bring Islamic banking to Australia for the first time. Together with the original founders, IBA Group is owned by Abreco Group, a large UAE-based company.
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