Gatehouse Bank launch signatory to standardised wakala placement agreement

19th January 2010

Uniformity will help drive growth of Islamic Finance

Gatehouse Bank plc, the latest Islamic bank in the UK to be granted an FSA licence, was the only western Islamic financial institution at the signing of a standardised wakala deposit agreement in conjunction with other 25 other Islamic banking institutions from around the world. The placement agreement will provide an alternative to the commodity murabaha structure, and provide a cost effective platform for depositors to invest funds, whilst realising the transparent and robust quality of Shari'ah compliant asset investments.

Commenting on the agreement, Gatehouse Bank CEO, Richard Thomas, said:

"Islamic finance has grown particularly over the last few years as investors, clients and banks alike have grown in confidence and capability. Standardisation is essential for all parties and can only further enhance demand for Shariah-compliant products and services. This is an important development for international Islamic finance and will greatly assist the development of new products and services. We are honoured to have been a signatory to this new standard."

The wakalah structure is the latest push internationally to harmonise the operating systems of Islamic transactions. Globally, it is estimated that the fast-growing Islamic finance industry is worth $1 trillion and the removal of limitations to this growth will only accelerate this development.

Mufti Muhammad Nurullah Shikder, Head of Shariah Advisory and Compliance at Gatehouse added:

"This is a true milestone in the development of Islamic finance, creating a robust and transparent system for all institutions. There will now be certainty with a standard methodology in working to the wakala structure across the globe and a credible alternative to murabaha".

A total of 26 institutions signed the deal providing the industry with a real alternative to the widely used and contentious murahbaha structure to open deposit accounts. Under this structuring, an organisation that wishes to place funds with an Islamic bank will appoint the bank itself as the buying agent. In wakala, the depositor authorises an agent to invest these funds, removing the brokerage fee and providing a simpler, less bureaucratic investment method.

The Association of Islamic Banking Institutions Malaysia, on the launch of the agreement added:

"Besides cost and resource savings, the adoption of the standardised wakala placement agreement would promote transparency, consistency, operational efficiencies and robustness in Islamic deposit placement transactions."

Wakaka is an agency transaction involving two parties, the owner of the capital (Muwakil) and the Bank (Wakil). The investor, who is the owner of the capital, places a specified sum of money with the Bank, which acts as the Wakil in investing the funds in specific investment activities of the Bank with the objective of making profits.

The launch of the placement agreement is yet another step forward in making Islamic finance a more accessible and widely used method of finance internationally. Gatehouse Bank launched the Bursa Suq Al-Sila' commodity trading platform in September, an end-to-end Shari'ah-compliant commodity trading platform facilitating commodity-based Islamic financing under Shari'ah principles.

For all media enquiries, please contact:

Angelena Lee
Gatehouse Bank plc
Email : info@gatehousebank.com