Offa Acquires UK’s First Shariah-Compliant Home Finance Portfolio

Offa, a Birmingham-based fintech company specializing in Shariah-compliant property finance, has made a historic move in the UK’s Islamic finance sector by acquiring the Alburaq Shariah-compliant Home Finance Portfolio from the Bank of Ireland. This portfolio, encompassing over 350 home purchase plans, marks the first-ever sale of a Shariah-compliant finance portfolio in the UK, highlighting the rapid growth and evolution of the Islamic finance market.

This acquisition represents a major step forward for ethical finance in the UK. By incorporating this portfolio into its operations, Offa is broadening its customer base and solidifying its reputation as a leading provider of Shariah-compliant property finance solutions. The move not only enhances Offa’s market presence but also reinforces the growing demand for ethical and Islamic finance options among UK homeowners.

The Alburaq Shariah-compliant Finance Portfolio launched two decades ago, was one of the UK’s earliest Shariah-compliant home finance offerings. It provided an ethical alternative to conventional interest-based mortgages, catering to the needs of the UK’s growing Muslim population and others seeking ethical finance solutions.

• Beginnings: Alburaq set the stage for Shariah-compliant financial products in the UK by offering home purchase plans aligned with Islamic principles, including the prohibition of interest (riba).
• Building Trust: Over the years, Alburaq earned the trust of a loyal customer base, making it a cornerstone of the UK’s Islamic finance ecosystem.

With its integration into Offa’s portfolio, Alburaq’s legacy continues to thrive, now supported by Offa’s innovative approach and expanded service offerings.

The acquisition of the Alburaq portfolio is a strategic move that aligns with Offa’s broader mission to modernize Islamic finance and expand its presence in the UK property finance market. By integrating this portfolio, Offa reaffirms its commitment to providing ethical, customer-centric solutions.

Offa’s leadership team has deep connections to Alburaq’s early operations. Several executives, including Chief Financial Officer Amir Firdaus, were instrumental in distributing Alburaq products during its inception. This acquisition feels like a “homecoming” for many customers, who can now access a wider range of services tailored to their needs.

Islamic Finance in the UK

The global Islamic finance industry is projected to surpass $4 trillion in assets by 2025, driven by demand from Muslim and non-Muslim investors alike. The UK, home to over 3.9 million Muslims, has emerged as a global hub for Islamic finance, supported by a robust regulatory framework and an increasing appetite for ethical financial products.

Islamic finance principles, such as the prohibition of interest and speculative transactions, resonate with a wide audience. Many non-Muslim investors are drawn to its ethical and transparent approach, which avoids industries like alcohol, tobacco, gambling, and weapons.

In July 2024, Offa launched its Shariah-compliant buy-to-let (BTL) finance service, marking a significant milestone in the modernization of Islamic finance. This innovative offering caters to both Muslim and non-Muslim property investors looking for ethical alternatives.

1. Rapid Decisions: Leveraging advanced technology, Offa delivers funding approvals quickly, often within days.
2. Digital Simplicity: A fully paperless process ensures a seamless experience for customers.
3. Broad Accessibility: The service is available to UK residents, expatriates, and landlords at all levels of experience.
4. Flexible Property Values: Financing is offered for properties valued between £60,000 and £1 million in England and Wales.

Related: Challenges For Islamic Financial Products In Ireland

The BTL service reflects Offa’s commitment to breaking down barriers in Islamic finance. By streamlining traditionally complex processes, the company is making ethical property investment accessible to a broader audience.

Strategic Expansion

To support its growing portfolio and new product launches, Offa secured £230 million in Shariah-compliant funding in 2024. This financial backing has enabled the company to:

• Expand its operations within the UK property market.
• Develop innovative products aligned with Islamic principles.
• Meet the increasing demand for ethical finance solutions.

The acquisition of the Alburaq portfolio is a landmark achievement for Offa and the broader Islamic finance industry. It highlights:

• Market Confidence: The successful transfer of a major Sharia-compliant portfolio underscores the viability of ethical finance solutions.
• Leadership in Innovation: Offa’s ability to navigate complex legal and tax frameworks demonstrates its expertise and forward-thinking approach.

CFO Amir Firdaus remarked: “It is a testament to Offa’s abilities that Bank of Ireland has agreed to sell their Islamic home finance portfolio to us. This acquisition not only strengthens our market position but also allows us to reconnect with customers who value ethical, Shariah-compliant finance.”

Customers transitioning from Alburaq to Offa gain access to an expanded suite of Shariah-compliant financial products, including the new BTL service.

Offa’s digital-first approach simplifies the application and management process, ensuring a seamless and efficient customer journey.

Clients can trust that all Offa products adhere to strict Shariah principles, offering peace of mind alongside financial solutions.

Challenges in Islamic Finance

• Regulatory and Tax Complexities: Navigating the UK’s legal and tax frameworks for Shariah-compliant finance can be challenging. Offa’s bespoke funding structures are a testament to its ability to overcome these hurdles.

• Customer Awareness: Many potential customers remain unaware of the availability and benefits of Islamic finance products, highlighting the need for increased education and outreach.

• Technology Integration: While Offa has made significant strides, integrating advanced technology into traditional Islamic finance remains an ongoing challenge.

Opportunities for Growth

Offa’s success with BTL finance opens the door for additional offerings, such as:

1. Commercial Property Finance: Catering to businesses seeking ethical investment options.
2. Green Finance: Developing eco-friendly projects aligned with Islamic principles.

The international Islamic finance market presents opportunities for UK-based firms like Offa to expand their reach and influence.

The Impact on the Islamic Finance Industry

The Alburaq acquisition signals a maturing Islamic finance ecosystem in the UK, where ethical finance solutions are increasingly mainstream.

This transaction serves as a model for future deals, demonstrating the feasibility of transferring Shariah-compliant portfolios while maintaining adherence to Islamic principles.

Offa’s innovative approach positions it as a leader in the sector, paving the way for other companies to follow suit.

What This Means for the Industry

The acquisition of the Alburaq portfolio has broader implications for the Islamic finance sector:

• Ethical Finance: It reaffirms the appeal and viability of Shariah-compliant financial products.
• Infrastructure: The deal showcases the importance of robust frameworks for managing Shariah-compliant transactions.
• Innovation: Offa’s success highlights the potential for innovation within the constraints of Islamic finance principles.

Offa is not resting on its laurels. The company’s plans for the future include:

1. Enhanced Technology: Investing in artificial intelligence and blockchain to further streamline operations.
2. Product Diversification: Expanding into new areas such as commercial finance and sustainable investments.
3. Global Collaboration: Building partnerships with international Islamic finance institutions to drive growth.

The acquisition of the Alburaq Shariah-Compliant Finance Portfolio marks a pivotal moment for Offa and the UK’s Islamic finance industry. By integrating this legacy portfolio and expanding its range of innovative products, Offa is setting a new standard for ethical, interest-free financial solutions.

As the demand for Shariah-compliant finance grows, Offa is poised to lead the way, blending faith-based ethics with cutting-edge technology. With its customer-centric approach and commitment to innovation, Offa is not only reshaping the UK’s property finance market but also paving the way for a brighter future in ethical finance worldwide.