For sharia-compliant banking to fulfil its potential, it needs to expand beyond its core markets of the Middle East, North Africa and Southeast Asia, and target the millions of Muslims living in non-Islamic countries.

Banks seeking lessons on how to expand often look to London, which enjoys a repu-tation for being Europe’s hub for sharia-compliant finance – a status Gulf banks have played a major part in developing.

The Islamic Bank of Britain, the only standalone Islamic bank in the UK to offer retail banking, was set up in 2004 by a group of high-profile Qatari investors, including Emir Sheikh Hamad bin Khalifa al-Thani.

The other four wholly Islamic banks restrict their activities to investment banking, but also have Gulf-based backers. The Bank of London & The Middle East is backed by Kuwait’s Boubyan Bank, and Gatehouse Bank is wholly owned by another Kuwaiti institution, The Securities House.

European Finance House’s major shareholder, with a 66 per cent stake, is Qatar Islamic Bank. The European Islamic Investment Bank is also backed by prominent Gulf investors.

Despite this support from Gulf shareholders, all five UK institutions market themselves as local banks, rather than offshoots of Gulf banks. But establishing a new brand as well as a novel form of banking means it can be difficult to attract customers – after five years in business, the Islamic Bank of Britain has only signed up 40,000 customers.

If they want their investments to perform better, the Gulf banks will need to increase the capital base of their UK banks, or push them to consolidate. London may be a hub for sharia- compliant banking in Europe, but Islamic finance occupies only a tiny niche and there is much more to be done before Islamic banks make the most of their potential.