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Sunday, 10 March 2013

Green Deal Finance Company exploring plans for Islamic financing

Energy and Climate Change Secretary Ed Davey has confirmed the government is investigating how to make the Green Deal scheme accessible to devout Muslims, who are currently unable to take advantage of the initiative's energy efficiency loans.

Under sharia principles, Muslims are not permitted to charge or pay interest on loans and as such financing and mortgages is technically deemed haraam or prohibited.
The rules have led the development of a fast-expanding Islamic banking sector that uses a profit and loss sharing model to allow Muslims to access Islamic mortgages and other financial services that are not in breach of sharia.
Under the Green Deal, loans allow households and businesses to undertake energy efficiency improvements at no upfront cost and then make repayments using the money saved from the resulting reduction in energy bills. But currently the interest rates of around seven per cent charged on Green Deal financing packages mean that Muslims are unable to take part in the scheme for religious reasons.
Responding to a question on the issue at a building industry event earlier this week, Davey said the Department of Energy and Climate Change (DECC) was aware of the problem and was working with the Green Deal Finance Company to develop an offer that is in line with Islamic Banking principles.
Tracy Vegro, director of energy efficiency at DECC, added that developing the new offer was "a live issue" and stressed that the department was committed to making the scheme as accessible as possible.
A new Islamic Green Deal offer would not only make the energy efficiency scheme available to the UK's 2.7 million Muslims, but would also allow Mosques and other religious centres to take advantage of the energy efficiency programme.
Davey said that he wanted to see the Green Deal become a "movement" that is widely promoted by faith groups, community groups, charities, and local authorities, as well as the business offering Green Deal services.
He also revealed fresh details on how the government plans to deliver "Green Deal 2.0" over the coming months and years through a package of measures that will serve to drive adoption of the scheme.
(Business Green / 08 March 2013)
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