Business -Financial Management degree, University of Westminster,
IN THE NAME OF ALLAH, THE MOST GRACIOUS, EVER MERCIFUL
The purpose of this study is to investigate basic prohibitions in the Islamic commercial law andto identify the issues and challenges Islamic banks are facing in the U.K. Islamic bankingindustry is in its developing stage in the United Kingdom. British policy makers desire to developLondon as a global hub for Islamic banking industry. However, as Islamic banking sector is in itsevolutionary stage, therefore, it is facing various issues and challenges globally, specifically inthe U.K.This is a qualitative study. And the primary data is collected with the help of in-depth interviews.Six participants participated in the interviews, where three participants were working for Islamicbanks in the U.K and remaining three were PhD scholars who have done research in the broadsubject area of Islamic finance. Such sampling helped the study to have insight of the issues intheory and practice both.Findings of the study illustrate that interest rate, Gharar and investment in prohibited (Haram) orunethical activities are strongly prohibited according to Islamic commercial law. However,Islamic banks do not have set procedure to eliminate Gharar completely from their contracts.Furthermore, Islamic banks in the U.K cannot use Musharakah contract while financing otherbusinesses as by using the Musharakah contract banks will be exposed to excessive risk ofloss. Islamic banks also do not have a proper solution for avoiding interest baring transactionswhile corresponding with foreign conventional banks. Outcomes of the study also suggests thatIslamic banks should also have a separate regulatory framework in the U.K. as the currentregulatory framework was formed for conventional banks thus, it is causing complexities for theIslamic banks to operate in the U.K. It was also discovered that there is a need of increase inthe quantity and quality of appropriately-qualified human resource for Islamic banking industry inthe U.K which will help Islamic banks to offer innovative products and services to theircustomers in the competitive financial industry of the United Kingdom.