UK Islamic banks set to receive a boost as Bank of England opens alternative liquidity facility
The UK’s Islamic banks are set to receive a welcomed boost as the Bank of England opened its Alternative Liquidity Facility this week and accepted deposits from participating banks for the first time.
LONDON: The much-awaited Alternative Liquidity Facility (ALF) is structured as a wakalah or fund-based facility and will enable participating banks to deposit funds. Participants’ deposits are backed by a fund of high-quality Sharia compliant securities (sukuk). The return from these instruments (minus hedging and operating costs) will be paid to depositors in lieu of interest.
The Bank of England (BoE), the country’s central bank, said that the fund purchased sukuk issued by the Islamic Development Bank (IsDB) in the first instance. The IsDB is a Sharia-compliant multilateral development bank and carries a triple AAA credit rating.
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