Struggling Islamic Bank of Britain is bailed out with £20m by Qatar

Islamic Bank of Britain, the country's largest Shariah bank, was today bailed out by its largest shareholder Qatar.

Qatar International Investment Bank is injecting £20 million of fresh capital through an issue of two billion new shares at just 1p each.

IBB said that without the injection it would not be able “to continue operating as going

concern”.It also said the cash was needed to ensure that it complied with the Financial Services Authority's capital adequacy rules. Shariah banks in the UK have suffered during the economic downturn and particularly from the slump in the housing market.

Lloyds recently withdrew from the UK market for Shariah loans while hsbc said it sees better growth opportunities in overseas Muslim communities.

IBB, which has some 50,000 customers, saw its losses mount last year from £5.9 million to £9.5 million. It raised £7.5 million of extra capital in January 2009.

Today it warned that it could be forced to cut back its growth plans and possibly reduce the number of branches and employees.

IBB shares dropped 1.12p to 2.13p on the news.The bank floated on the stock market in October 2004 when it issued shares at 25p each.

Qatari investors, who are deemed to be acting as concert party, will end up owning just over 88% of the shares up from their current holding of just over 50%.

IBB said it “continues to face challenging trading conditions and continues to review its operating cost base”.