APRA revokes Islamic Bank’s banking licence
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The news: The Australian Prudential Regulation Authority (APRA) has agreed to a request from Islamic Bank Australia to revoke its licence to operate as a restricted authorised deposit-taking institution (ADI).
The numbers: APRA granted Islamic Bank Australia, then operating as IBA Group, a licence to operate as a restricted ADI under the Banking Act 1959 in July 2022.
The context: The neobank said it decided to surrender the licence as there were challenges in raising the necessary capital maintain its licence. It has now changed its name to Islamic Money as it is no longer a bank but is still pursuing options to raise the necessary capital to re-apply for a banking licence in future.
In May 2023, Islamic finance provider, Hejaz Group made a $10 million investment in Islamic Bank Australia.
At the time of the licence revocation, Islamic Bank Australia had not launched any products and had no customers and zero deposits.
The bank was set to be the first Islamic bank in the country and was created for Muslims living in Australia, with a plan to launch products endorsed by Islamic scholars to ensure they were Sharia-compliant. This meant the bank would not profit from interest and would be forbidden from dealing with certain industries such as gambling, alcohol and pornography.
The revocation of its licence follows the closure of fellow Australian neobanks, including Volt and Xinja, in recent years.
What they said: In a statement the Islamic Bank of Australia said: "The journey thus far has been one of passion, dedication, and unwavering commitment to providing Islamic financial services to our community".
"However, the current capital market conditions have proven to be exceptionally challenging at this stage of our endeavour," it said.
The source: APRA media release
