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The first dedicated UK Islamic bank has now left retail banking.
Posted 6 July 2026
Islamic Bank of Britain was the first dedicated Islamic bank in the UK, and was set up in 2004 as a retail bank, aiming at ordinary individuals ("the man on the street") as customers.
Having followed the bank relatively closely for many years, I was quite surprised last year to learn that it had exited retail banking. I made this the topic for my November 2025 column in the magazine "Islamic Finance News."
You can read it below.
When you have been used to a person, or organisation, being a particular way, it can be very hard to notice when they change, especially if they don’t broadcast it. I have just realised that this has been the case with the UK’s Al Rayan Bank(“ARB”).
I have written about ARB on many occasions, both with its current name and in its former incarnation of Islamic Bank of Britain before its takeover in 2014 by Masraf Al Rayan (now called AlRayan Bank) of Qatar. Most recently, my 5 June 2024 column “How is the UK’s only retail Islamic bank doing?” looked at its results for the years 2018-2023.
It was only a recent conversation with an old friend that made me realise that while focusing on the financial results I had missed a fundamental change in the bank.
The background is that I recently held a dinner in Manchester with family and friends to celebrate my 75th birthday. One of my friends, who is a practicing accountant, mentioned that all of his clients and acquaintances who had applied for home purchase finance with ARB had been turned down.
I assumed that it was due to them being poor credit risks and decided to look at whether ARB was operating unduly strict credit assessment criteria when deciding who to finance.
Accordingly, I asked my research assistant, Perplexity AI (see my 1 October column) to compare ARB’s credit loss ratio with similarly sized (conventional) UK banks and building societies. I didn’t think it would be feasible to get an actual comparison of credit assessment criteria, but actual loss experiences should be in line with assessment strictness.
This did indeed show that ARB is experiencing much lower credit losses, so my intuition had been correct.
For example, in the 2024 accounts note 29 shows home purchase plans of £933 million with expected credit losses of only £89,000 which is about 0.01%. That compares with the Building Societies Association reporting that at the end of 2024 the sector showed arrears as 0.33% of outstanding loans.
However, looking at the 2024 ARB accounts in more detail than I normally would led me to identify some interesting wording that I had not previously focused on.
In the introduction: “Our ambition is for Al Rayan Bank to be the most trusted Sharia-compliant bank in the UK, providing Premier and Commercial Property Finance.”
In Section 5 of the Strategic Report: “In 2024, the Bank realigned its successful strategy with a focus on Commercial Banking and Premier Banking.”
Looking back at previous accounts, I see that the shift in language dates back to 2021.
I was aware that it had started closing physical branches, in that year closing London Whitechapel, and Birmingham Small Heath. However, the 2021 accounts did not make it clear that it was leaving retail banking. Rather they seemed to cover everything.
To quote from the introduction: “Current products include Commercial Property Finance, Home Purchase Plans, Premier Home Purchase Plans, current accounts and a range of savings accounts catering for different needs for resident and non-resident customers.”
In my 7 September 2022 column, “Retail Islamic banks need to become internet-only” I commended ARB’s closure of its physical branches. Since serving retail customers internet-only makes sense, I did not see this as presaging an exit from retail banking, although in ARB’s case it did.
In my next column I plan to consider whether UK Islamic retail is a lost cause.
Mohammed Amin is an Islamic finance consultant and former tax partner at PwC in the UK.
