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Bank sets up Shari’ah loan for Scotland

United National Bank is offering what it says is Scotland’s first Shari’ah-compliant mortgage.

UNB has worked alongside City lawyers Norton Rose to develop an Islamic mortgage for the Scottish legal framework.

The two companies had already worked together on a Shari’ah-compliant mortgage for England and Wales.

Norton Rose has already developed diminishing-ownership Islamic mortgages for UNB and Arab Banking Corporation but it had to seek expert help on Scottish law from legal firm Tods Murray.

The Arab Banking Corporation mortgage is distributed in England and Wales through Bristol & West. HSBC has also moved into the Islamic mortgage market.

The development of Shari’ah mortgages was opened up by Chancellor Gordon Brown last year when he stopped double stamp duty payments on Islamic home products.

Shari’ah Islamic law forbids benefiting from interest payments or paying of interest so the usual UK mortgages were unfeasible.

Norton Rose associate Mohammed Paracha says: “The need to structure the product both to Shari’ah principles and to Scottish law proved challenging for a number of reasons.”

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