UK-based fintech Offa has launched a new buy-to-let (BTL) finance service, aimed at modernising Islamic finance for both Muslim and non-Muslim property investors. The service offers rapid funding decisions through a digital, paperless process, marking a significant advancement in the traditionally complex Islamic finance sector.

Offa's BTL service leverages advanced software to ensure a smooth and efficient application experience. It is available to British residents and UK expatriates, including new and seasoned landlords, with property values between GBP 60,000 and GBP 1 million in England and Wales. The service follows the Islamic finance principle of co-ownership with leasing, allowing customers to gradually acquire full property ownership through monthly payments, without interest.

A notable feature of Offa's BTL product is its flexibility in meeting affordability criteria. If rental income is insufficient, customers can use personal monthly income to cover the shortfall, a practice known as top-slicing, enabling more investors to qualify for the necessary financing. Offa’s ethical finance model adheres to Islamic principles, avoiding interest charges and investments in sectors such as alcohol, tobacco, and the arms trade.

The service is accessible to first-time landlords and those with houses in multiple occupancy (HMOs), catering to a wide range of investor needs. In April 2024, Offa secured a GBP 100 million credit line for its bridge finance arm from a fund managed by UAE-based Gulf Islamic Investments Group (GII). This substantial credit line, the largest of its kind outside the Gulf, enhances Offa's capacity to expand and diversify its financial offerings within the UK property market.Offa's streamlined digital application process can provide swift decisions based on credit rating and risk criteria, making Islamic finance more accessible and efficient for a broader range of investors.

Increasing demand for Islamic finance products in the UK The demand for Islamic finance products in the UK has been steadily rising, driven by a combination of demographic shifts and a growing preference for ethical investment options. The Muslim population in the UK has notably increased, reaching approximately 6.5% of the total population, with a significant proportion being younger individuals. This demographic trend not only expands the potential customer base for Islamic financial services but also underscores a long-term demand for products that align with Islamic principles of ethical finance.

Moreover, there is a broader societal trend towards ethical investments across the UK, transcending religious boundaries. Investors increasingly prioritise socially responsible financial products, viewing Islamic finance as a viable option due to its stringent ethical standards. Market studies and surveys indicate a growing interest among non-Muslims as well, with many expressing willingness to consider Islamic finance products if better informed.

With a supportive regulatory environment and institutional backing, including government-issued sovereign Sukuk and educational initiatives, the UK's Islamic finance sector is poised for continued growth and diversification in the years ahead, contributing to its position as a leading hub for Islamic finance in the Western world. .