Bank of London and The
Middle East
(BLME), the London-based Islamic bank has nearly
doubled its number of leasing deals in the first half of this year,
and said it has a “strong pipeline” of business for the second half
of the year.

BLME, whose financing and banking operations
abide by Sharia principles, said leasing deals increased 96% to 57,
worth £67m in six months to June — up from 29 (£19m) in the same
period a year earlier.

The asset finance division’s strong
performance contrasts with the sluggish growth seen in most areas
of the European leasing industry and highlights growing demand for
Islamic finance.

Most of BLME’s leasing business (about 60%) is
with small and medium-sized businesses in the UK who leased
transport and equipment assets such as containers, vans and
material handlers.

BLME’s leasing contracts use a “Ijara”
financial product — one of the most commonly used Islamic finance
products. This structure, which has been used by individuals and
businesses for hundreds of years, allows organisations to use
equipment that they would have been unable to purchase outright. It
can be structured to match a finance lease or an operating
lease.

Graeme Laing, BLME’s head of leasing, said that most of its UK
customers aren’t Muslim, and are attracted by its flexible services
and quick decisions on deals.

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“As Ijara has a familiar look and feel to
counterparties used to conventional leasing products, we’ve found
that many businesses that are unused to Islamic financial products
are comfortable using it,” he said.

Laing said he was confident that BLME could maintain its rapid
growth in the UK. The asset finance division is recruiting
executives to help it expand new business.

Fast growing industry sectors for leasing
include food production and distribution sectors. Transport
companies are beginning to invest in new trucks and other vehicles
again, after making do with old assets for the past two or three
years because of the economic downturn, Laing said.

Islamic finance aims to create business
activities that generate a fair and equitable profit from
transactions that are backed by real assets. This method of
financing avoids speculation, short selling and excessive credit
creation whilst encouraging sound risk management procedures, BLME
said.