Australia’s first Islamic bank granted a license

Australia will see its first Islamic bank open, a significant step forward for the country’s 800,000 Muslim population.

Islamic Bank Australia has been granted a limited license by the Australian Prudential Regulation Authority – the first of its kind Down Under.

With the introduction of the bank, Muslims who do not pay or receive interest because of their religion can now achieve their goal of owning a house.

Islamic Bank Australia will offer a range of services to Muslim customers, including home financing, savings and daily accounts.

It will run a test run with a small number of clients before going public, with 8,000 people already on the waiting list.

The bank’s CEO, Dean Gillespie, said the home financing model would be “jointly owned,” meaning customers would be charged rent while living below the bank’s share of the property rather than paying interest.

‘[The customer] could start with a 20 percent down payment…that means they would own 20 percent of the house, and the bank would own the other 80 percent,” he said.

‘What we allow’ [the customer] to do is to buy more shares of that property over time.’

The tenant’s share of the property increases as he pays rent, until he becomes the full owner of the home.

Under the Islamic faith, the bank is also prohibited from doing business with, among other things, alcohol and games of chance.

Mr Gillespie said they would also only do business with companies that promote climate-friendly policies.

“We hear stories of people keeping money under the bed or in the safe at home because they didn’t like putting it in the conventional banking system,” he said.

“That’s something we really hope to fix.”

The bank also has significant interest from non-Muslims, with people preferring the rent system over accruing interest.

‘We are constantly getting questions from Australian expats who have lived in the Middle East… and used Islamic’ [finance] products,” he says.

“They come on our waiting list and say, ‘We just really like the ethical nature of the products’.”

Islamic Bank Australia’s limited license allows it to test products with a small number of customers for up to two years before applying for a full license.

The bank has set itself the goal of going public in 2024. More than a million Muslims are expected to live in Australia by that date.

“There are already six or seven different Islamic banks in the UK…but there is no such thing in Australia,” Gillespie said.