The UK’s first directly authorised Islamic finance-compliant peer-to-peer lender is set to launch.
Nester is offering investors returns of up to nine per cent, secured on UK property.
The Financial Conduct Authority-approved platform offers buy-to-let, refurbishment and bridge financing for corporates.
It promises indicative terms within 48 hours, credit approval in five days and prefunding within three weeks.
This is a Shariah-finance product based on Islamic rules where interest-based loans are prohibited.
Instead of a traditional loan agreement, the borrower, known as a buyer, and investor agree a deferred purchase and sell a debt obligation based on an agreed cost and mark up of a specified commodity.
This contract is known as a commodity murabaha.
Nester acts on behalf of all investors and has an agreement with a broker with a trading platform allowing it to buy commodities such as metals.
One of the platform’s co-founders is Mohammed Paracha, a former member of the Bank of England Committee on Islamic Finance.
“In 2002 we made sweeping changes to the legal and regulatory system of the United Kingdom to level the playing field for Islamic Finance,” he said.
“This paved the way for London to host a number of new banks and Islamic products and become known as a global hub for the industry. London is now a multi-billion-dollar home for Islamic finance related transactions.”
The platform said it has been boosted by new HMRC rules that simplifies home finance rules for P2P lenders and Islamic finance providers.
Previously, alternative lending arrangements could have led to extra stamp duty bills due to the structure of loans but now the rules have been brought in line with mainstream lenders.
‘The changes fix a roadblock that was inadvertently created when the rules for fintechs were first introduced,” Paracha added.
“The dots had not been connected back to the earlier rules and this meant that new FCA regulated Islamic P2P fintechs, such as Nester, were at a disadvantage and limited in product offerings in order to avoid the same double stamp duty issues that existed pre-2002.
“The playing field has now been levelled.”
Other Shariah-compliant P2P lenders include Qardus, which launched in July 2020 and is an appointed representative of ShareIn.
European alternative lender Robocash Group entered the Islamic finance market in 2019 by partnering with a Shariah-compliant firm in Indonesia.