What could be more middle England than Waitrose? So it was intriguing to learn that the delivery company most closely associated with it - Ocado - has accepted a £10 million investment from the Bank of London and the Middle East (BLME), which advertises itself as “sharia’a compliant”.
At first glance this is perplexing. Will the wide-aisled bastion of high quality deli and fine wines for the upper middle classes have to forgo the delivery of alcohol and pork products in order to receive its cash? “No,” Ben Lovett, a spokesman for Ocado, tells me. “No change there.”
So how does the Islamic financing house justify this arrangement? Surely the whole point of Islamic financingis that it has no truck with that which is haraam, or forbidden - and pork and alcohol fall squarely into this category? Otherwise what’s the point of pretending it’s any different from any other kind of bank?
Professor Habib Ahmed, who holds the Sharjar Chair in Islamic Law and Finance at Durham University, explains that matters are not, as I suspected, quite so straightforward. “There are different opinions about financing this kind of company. There are two possibilities. One is that because alcohol and pork are not their main business an allowance has been made.
“Second, it is possible that they have structured the deal so they have only invested in a part of the business that is not involved with pork or alcohol. An example might be if an investment is made in a hotel that has a bar, it may possible to organise it so that the two elements are separated financially.
“But unless the sale of alcohol and pork is a very small part of the business it would be difficult for sharia to allow this transaction. It would hang on a technicality - the contracts would be screened by a sharia board. A permissable percentage would typically be three to five per cent.”
So what is the nature of this deal? Nigel Dennison, BLME’s executive director and head of markets, tells me: “We have supplied £10 million for a leasing contract. We bought some equipment from Ocado, which I believe is something to do with cardboard boxes and the automated packaging process, and we are leasing it back to them. We have a sharia boardand the scholars signed it off.”
He reiterated much of what Professor Ahmed had told me, including that the admissable proportion of business involving alcohol and pork is unlikely to be more than five per cent. This, he said, is the rule-of-thumb figure in much of Islamic financing, including the permissable amount of “interest” to be earned on a transaction that would prevent it from being considered usuary.
So what to make of this? Are we being asked to believe that less than five per cent of Ocado’s business involves pork or alcohol? This seems unlikely, given what I know about the average shopping trolleyin middle England (see paragraph six of this link, which suggests that the percentage three years ago was closer to ten per cent). Ocado, perhaps unsurprisingly, was unable to supply me with any relevant statistics.
With permissable rates of interest at a maximum of five per cent, might BLME not be more easily considered blameless if it concentrated on career development loans to young British people who would otherwise get stiffed by their usurious banks? A promise extracted not to spend any of it on booze might even produce some beneficial social consequences. It would be a test of the bank’s true intentions to watch it try...