The Bank of London and the Middle East (BLME)
has arranged a £10 million (€10.7 million) Sharia financing
facility for Ocado, the UK independent online grocer.
The £10 million ijara, essentially the Islamic
finance equivalent to a finance lease, will be used over a 60-month
period to finance a new automated picking line for Ocado’s Hatfield
Distribution Centre.

The online grocer had not been specifically looking for a
Sharia-compliant funding solution.

“We were introduced to Ocado through a source who has known the
FD at Ocado for many years,” said Graeme Laing, senior leasing
manager at BLME, who led the deal.

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“Ocado was looking to expand its funding arrangements outside of
its current panel of funders, and we were very interested in
winning a deal with the brand.”

BLME was up against other – more traditional – funders, which
were also invited to tender for the deal.

Laing believes BLME won because of its competitive pricing for
the funding, which could be delivered within the timeframe required
by Ocado.

Commenting on the deal, Tim Steiner, chief executive at Ocado,
said: “We had not considered Islamic financing before, but found
BLME’s competitive offering and experienced management team very
attractive.”

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Steiner attributed BLME’s win to the funder’s appreciation of
Ocado’s business needs and the flexibility of its leasing
terms.

“The ijara is a standard lease, and is no different to leasing
with a mainstream commercial bank,” said Laing.

“For such a strong household name to make this choice reflects
the growing appeal that Sharia finance has in the global
market.”

The transaction with Ocado is BLME’s first retail financing deal
in the UK, and Laing believes it illustrates how Sharia-compliant
products are becoming more easily accepted by mainstream UK
corporates.

“Previously there may have been some reluctance to look at this
form of leasing, but once we explain the Sharia concept, they
understand that there isn’t much difference to traditional
funding,” he explained.

“Islamic finance is a competitive source of funding in the
market place, and we’re responsive and asset-hungry to grow our
business.”