FCA authorises Offa to provide Sharia-compliant home purchase plans

The FCA has authorised Islamic property finance fintech, Offa, to provide home purchase plans (HPPs), the Sharia-compliant alternative to conventional residential mortgages.

The authorisation will soon allow Offa to become the third active provider of HPPs in the market.

Offa believes that this is the first licence by the FCA for a home purchase plan to a newly-authorised entity in more than seven years. 

Offa launched with a bridging finance range and later introduced the first Sharia-compliant buy-to-let product to the UK.

Since charging interest is forbidden in Islamic finance, a home purchase plan involves the Islamic finance principles of co-ownership-with-leasing where customers acquire the property in partnership with Offa and make monthly payments to increase their share, over time owning it. Sharia-compliant buy-to-let is based on the same principle except that those customers make payments from received rental profits.

The company recently acquired Bank of Ireland’s Alburaq Sharia-compliant home finance portfolio utilising a unique funding structure, including more than 350 home purchase plans.

Offa provides an ethical finance model designed in accordance with Islamic finance principles, which means not charging interest and investment into sectors deemed harmful to society – such as alcohol, tobacco, animal testing, and the arms trade.

Sultan Choudhury, executive chairman at Offa, said: “This is a significant and hard-won milestone for us at Offa. The real winners of course will be our customers, who will now gain greater access to our fast and easy Islamic home finance services thanks to our modern, tech-driven and paperless systems.

“By combining our teams’ decades of industry experience with the latest technology, we are bringing Islamic finance into the 21st century, leaving behind the onerous paperwork and cumbersome systems that many customers have typically had to suffer in the past Gaining this important authorisation is another step toward achieving that.”

Riaz Husain, chairman of Offa Money, added: “Receiving this authorisation from the FCA will provide reassurance to our customers that Offa is adhering strictly to regulations as we provide high quality, faith-based Islamic home finance products to aspiring property investors and landlords across the country.”