European Finance House, a unit of Qatar Islamic Bank, has been awarded a UK banking licence that will help it capitalise on growing demand for Islamic finance among the European Union’s 14m Muslims.The licence underscores the ambitions of Doha-listed QIB in the UK and Europe. The bank is among the leading shareholders in the Shard, a new commercial property development on the south bank of the Thames near London Bridge. EFH, of which QIB owns 66 per cent, is acting as corporate fin-ance adviser to QIB on the project.

Michael Clark, chief executive of EFH, said: “Demand is on the rise for Shariacompliant investments and finance. We think that with QIB’s distribution in the Middle East and our knowledge of European and Middle Eastern markets, we can build a real bank and deliver double-digit returns on capital in our first three years.”

He said his credentials in building banks for Japanese and Middle Eastern institutions in the UK had helped EFH obtain its banking licence in nine months, rather than the 12 months or more that could be required for vetting before the Financial Services Authority granted a UK licence.

Mr Clark was recently head of the London-based corporate and institutional banking team at Arab Bank of Jordan. He was previously the general manager of the London operations of Japan’s Yamaichi, and has held senior roles at the London arms of Arab Bank of Jordan and Saudi International Bank.

To comply with Sharia law, an investment cannot produce returns by charging interest and cannot support industries condemned by Islam, such as alcohol, pornography and firearms.

Analysts said Middle Eastern investors interested in Sharia-compliant products had for several years been allocating more money abroad, which had provided an opportunity for mainstream banks with Islamic operations.

Citigroup and HSBC have had such capabilities for some time, while others, including Morgan Stanley and WestLB, have moved to harness the trend more recently.

Islamic products can be highly profitable, even though they cater to a relatively small niche, because the market is fragmented outside the Middle East and that allows achieving better margins than in more commoditised areas of finance.

Mr Clark said EFH would begin by distributing products such as an Islamic equities fund in the Middle East. It hoped to use the performance of these instruments to attract investment from Europeans interested in Sharia-compliant products, including private equity, sukuks and structured notes.

EFH’s other investors include Sheikh Hamad Bin Jassem Al-Thani, the Qatari prime minister, with a 10 per cent stake, and Groupe Financiere Centuria, the French asset manager, with ties to the sheikhs of Dubai.