In a media release dated Tuesday 5 July 2022, the IBA group announced that finally Australia’s first-ever Islamic Bank has now been licensed, creating the Islamic Bank Australia, the first Australian bank to offer a full suite of retail and business banking services, all without interest and fully Shariah-compliant for the first time in Australia.

IBA Group Pty Ltd, now Islamic Bank Australia, has obtained a Restricted Authorised Deposit-taking Institution (Restricted ADI) authorisation from the Australian Prudential Regulation Authority (APRA) allowing it to build systems, implement processes and test with a small number of customers in 2023.

IBA Group was originally founded by thirteen passionate Muslims who wanted to bring Islamic banking to Australia for the first time. Together with the original founders, IBA Group is owned by Abreco Group, a large UAE-based company.

Islamic Bank Australia is not open for business as yet.

Initially it will be operating as an Authorised Deposit-taking institution with a “Restricted ADI” licence which allows IBA to build systems and test  products before 5 July 2024 and then obtain Australian Prudential Regulation Authority (APRA) approval to launch publicly.

The main restriction is that IBA can only accept up to $2 million in deposits during the restricted period and when both IBA and APRA are satisfied that everything is working well, IBA will offer its products to the general public, hopefully within two years.

Australia’s Muslim population grew from 2.6% in 2016 to 3.2% of all Australians in the recent 2021 Census. Nearly a million Australians identify as being of the Islamic faith.

“With the number of Muslims in Australia growing by more than 6% every year, we’re excited to be bringing this new type of banking to the Australian community,” said Islamic Bank Australia CEO Dean Gillespie. Mr Gillespie was formerly Head of Home Loan Distribution at Commonwealth Bank, and Head of Mortgages at Bankwest.

Mr Dean Gillespie,
IBA Chief Executive Officer.

“We won’t bank gambling companies. We won’t bank big tobacco. We won’t bank alcohol companies. We will support charitable organisations for the greater good. We have already started this journey by planting trees and fighting homelessness. We’ll do everything we can to be a fantastic community bank that customers will be proud of. Islamic Bank Australia is an inclusive bank – you won’t have to be a Muslim Aussie to bank with us,” said Mr Gillespie.

Islamic Bank Australia’s Chair, Anthony Wamsteker, said “This is a big milestone for Australia as it provides choice, introduces diversity in Australian banking products, and provides financial inclusion for the Islamic community.” Mr Wamsteker was the CEO that founded ME Bank.

Mr Anthony Wamsteker,
IBA Chair and Director.

Products at Islamic Bank Australia will be endorsed by internationally renowned Islamic scholars to ensure they are Shariah-compliant. The IBA Shariah Committee is chaired by Dr Rashid Raashed PhD, one of IBA directors, Imam, Islamic thinker, expert on Islamic law and Shariah scholar on Islamic banking.

Dr Rashid Raashed, Chair of IBA Shariah Committee / Director.

Other two members of the IBA Shariah Committee include Dr Mohamed Ali Elgari, Professor of Islamic Economics and the former Director of the Centre for Research in Islamic Economics at King Abdul Aziz University, Saudi Arabia and Professor Dr Ashraf Md Hashim, Chief Executive Officer (CEO) of ISRA Consulting, a senior researcher at International Shari’ah Research Academy for Islamic Finance (ISRA) and Professor at the International Centre for Education in Islamic Finance (INCEIF).

Dr Mohamed Ali El Gari, Member IBA Shariah Committee.

 

Professor Dr Ashraf Md Hashim, Member IBA Shariah Committee.

Islamic banking is based on non-interest-based banking and is built on the concept of partnership between the customer and the bank, rather than the bank simply handing over money and charging interest.

For savings accounts, banks pool depositors’ funds and use them for ethical profit-producing activities, and then shares these profits generated with the customer – like a partnership between the depositor and the bank. The original deposit amount will be guaranteed, but the actual profit returned over the term may vary.

Home finance is based around co-ownership, with the bank charging rent to the customers when they are living as a tenant in the bank’s share of the property (instead of interest).

Mr Gillespie previously wrote to state and territory premiers calling for changes to stamp duty to exempt double taxation of some Islamic transactions; several jurisdictions are either changing as a result (e.g. ACT, Tasmania) or considering the changes.

Mr Gillespie also said that Islamic banks were inherently ethical, refusing to deal with certain industries.

“We won’t bank big polluters. We won’t bank big tobacco. We won’t bank live animal exporters. We will support charitable organisations for the greater good. We have already started this journey by planting trees and fighting homelessness. We’ll do everything we can to be a fantastic community bank that customers will be proud of. Islamic Bank Australia is an inclusive bank – you don’t have to be a Muslim Aussie to bank with us,” said Mr Gillespie.