The USA has a small but growing Muslim population. Accordingly for my May column for the magazine "Islamic Finance News" I decided to take a look at the USA's oldest established Islamic bank.
You can read it below.
Despite following US business generally relatively closely, I have never written about the Islamic finance scene in the USA.
It is hard getting reliable data on the number of Muslims in the USA. Unlike the UK, the US national census does not ask about religion, consistent with its Constitution’s First Amendment’s prohibition of the establishment of religion. I have seen estimates ranging from 2m – 6m. The private sector 2020 US Religion Census surveyed a random sample of mosques and came up with an estimate of 4.45m which seems reasonable. Research from Pew indicates that on average US Muslims have similar incomes to non-Muslim Americans.
In 2021 the law firm of Pillsbury Winthrop Shaw Pittman LLP stated that University Islamic Financial is the first and only exclusively Shariah compliant bank in the USA. The bank has shortened its name to UIF Corporation, and its website mentions that Islamic Finance News magazine rated it as #1 Islamic Financing Institution in the U.S. from 2015 through 2019, and as the #1 Islamic Real Estate Financier (Global Award) in 2020 & 2021. Accordingly, I decided to take a closer look.
I could not find UIF Corporation’s financial statements on its website. However, it reports that it is a subsidiary of University Bank, (legal name University Bancorp, Inc.) and that company’s website does have consolidated financial statements for the year ended 31 December 2022.
University Bank is a conventional bank, and relatively small with total equity of only $88 million. UIF Corporation is its 80% subsidiary and was formed in 2005. (Intriguingly, about the same time that Islamic Bank of Britain was formed.) University Bank’s accounts state that UIF Corporation’s total equity at 31 December 2022 was $46 million. That makes UIF Corporation a relatively large part of University Bank’s total business; about 52% if you just compare the two equity numbers.
For me, the key message is how small UIF Corporation is. I only have UK Islamic bank figures for 31 December 2021 close to hand, but at that date the smallest of the UK Islamic banks, QIB (UK) plc had equity of GBP 79 million, or $ 99 million applying the exchange rate on the day of writing, while the other three UK Islamic banks were noticeably larger.
UIF Corporation also appears not to have a full banking license, since it discloses that it takes deposits as agent of its parent, although those deposits are segregated so that they are only used for Shariah compliant purposes.
My view is that the small size of the USA’s Islamic banking industry indicates low “effective demand” for Islamic banking from America’s Muslims, similar to the low “effective demand” seen from Muslims in the UK, or Germany as discussed in my 4 January 2023 article about KT Bank AG. By “effective demand” I mean demand expressed by the actions of consumers (for example in depositing money), as opposed to “expressed demand” when Muslims simply say that they would like to have Islamic banking.
Mohammed Amin is an Islamic finance consultant and former tax partner at PwC in the UK.