New Shariah-compliant Facility by the Bank of England to Support Islamic Banks in the UK

The Bank of England (BOE) has announced the launch of a new Shariah-compliant deposit facility which is set for the first quarter of 2021. Called the Alternative Liquidity Facility (ALF) and structured as a Wakalah fund-based facility, deposits from Islamic banks will be backed by a fund of high-quality Shariah-compliant assets, the returns of which will be given back to depositors in place of interest.

Given the long-standing challenges faced by Islamic banks in efficient liquidity management, Executive Director-Markets at the BOE, Andrew Hauser, stated that this new ALF would level the playing field and support Islamic banks in the United Kingdom, allowing them to compete with conventional players. This support would c...