Islamic bank to raise £40m to expand Sharia-only services

The Islamic Bank of Britain, which operates strict compliance with Sharia, which prohibits customers from giving or receiving interest, yesterday announced details of a stock market flotation that will value the business at £104.7m.

The Islamic Bank of Britain, which operates strict compliance with Sharia, which prohibits customers from giving or receiving interest, yesterday announced details of a stock market flotation that will value the business at £104.7m.

The bank's admission document to AIM revealed Sheikh Hamad bin Khelifa bin Hamad al Thani, a member of the Qatar ruling family, as the bank's biggest shareholder, with a 17.4 per cent stake along with the Qatar International Islamic Bank which holds the same level of stake.

The company said that it intended to raise £40m through a public share offer and a private placing of 160 million shares, with existing shareholders expected to take up their entitlement to avoid diluting their holdings. The bank hopes that members of the public will also participate in the offer and has made an online registration service for the share offer available on its website.

The proceeds will be used to open branches and set up an internet banking facility. The bank's first branch will be on Edgware Road, central London, with others expected in Bradford and Leicester.

Trading in the shares is expected to start on 12 October when 419 million shares will be admitted with an issue price of 25p.

The bank said its banking services might be attractive to people other than the country's 1.8 million Muslims. Sharia, as well as prohibiting interest, also bans money being invested in companies involved in tobacco, alcohol and pornography.

Offering deposit accounts that pay no interest but still make a return for savers is a highly complex business. One approach is to pool depositors' money to buy assets that are then sold to another bank at a profit, shared between the bank and its savers.

The bank received permission from the Financial Services Authority to start taking deposits earlier this month. It is not the first to offer Sharia-compliant financial services. HSBC has an Islamic mortgage.

The bank's non-executive chairman will be Abdul Malik and its managing director Michael Hanlon.