Read Things you didn't know about Islamic Finance

They are images that have become increasingly difficult to shake off, of hardline extremists plotting atrocities, of radicalised Mosques, of firebrand Imams and impressionable youths, of bombs and deaths from Baghdad to London and to New York and Washington. And they have seriously damaged the public’s perception of Muslims in Britain.

The reality for most of Britain’s two million Muslims is vastly different and somewhat more mundane. Although they are often treated as a generic whole, their allegiance is divided among the 70-plus forms of practice that make up the Faith.

There is no single body in Britain, or globally, that has the authority to speak on behalf of all Muslims, or which all the mosques and Muslim community centres in Britain account to.

However, figures from the Charity Commission, which collects annual returns for the UK’s 1,332 registered Muslim charities, provide an indication of the scale of funds raised each year by Muslims for charitable causes.

Total income in 2006 was £214.7 million across the 1,076 charities that filed returns, compared with the £203.6 million raised the previous year. Total expenditure amounted to £176.6 million, up from £159.8 million in the previous year. The figures also show that donations to Muslim charities dropped off after the September 11, 2001, attacks in the United States, to £116.6 million in 2002 from £128.7 million in 2001.

The financing of the mosque, the cornerstone of all Muslim communities, depends on the largesse of the flock and is determined by a series of principles based on a code of conduct known as sharia.

A Muslim is obliged to donate a specified amount of his or her income to charitable causes each year, while avoiding the collection and payment of interest in their other financial dealings.

The 700 mosques in the UK are all funded by their individual communities, who contribute through the zakat, the obligatory tax that is one of the five pillars of Islam, as well as through donations to the collection tray at Friday prayers and through a statutory payment during the Eidul Adha, the Feast of Sacrifice.

Zakat requires that Muslims give a minimum of 2.5 per cent of their income to charitable causes, after their annual income reaches a minimum level. This tax can be given to the mosque through a standing order, or directly to the poor and needy – most often during the holy month of Ramadan.

The Business and Economics Committee of the Muslim Council of Britain estimates that about 90 per cent of the funding for mosques and other religious activities comes from the local community.

Since 2003, the Government has moved to provide Muslims in Britain with access to sharia-compliant financial services, including loans that preclude the payment or receipt of interest, or riba. It is also forbidden for Muslims to invest in companies associated with products such as alcohol and tobacco.

Islamic banking is estimated to be a $500 billion (£250 billion) industry globally, with mainstream banks setting up dedicated units to provide sharia-compliant financial services. Amjid Ali, head of HSBC Amanah in the UK, the British market leader for Islamic finance, said: “Demand for these products and services is on the increase as customers understand what Islamic finance is, and how it works, and how it helps to remove them from forms of riba and direct them to more ethical forms of investment which are within the framework of sharia.”

The London Muslim Centre was built in 2005 at a cost of £10.5 million. Overseas funding accounted for just £550,000 of the total funding, while development agencies gave £2.4 million to the mosque. It has a dedicated public relations officer and publishes an annual report on its website. The accounts show that the mosque trust received donations of £2.2 million in 2006, down from £3.4 million the previous year.

Plans to build a “mega mosque” in West Ham, East London, caused controversy last year, amid allegations that construction of the 40,000-capacity mosque by the Tablighi Jamaat sect was being bankrolled by Islamist groups in Saudi Arabia.

A spokesman for the mosque denied that the move had been ill-thought out, saying: “This organisation has never sought publicity and never sought not to be transparent. Most of the funds are being raised from the local community, which is the traditional way of doing things.”

Mufti Barkatullah, a judge on the Sharia Council, blamed ignorance and a lack of confidence for the perceived lack of financial transparency among Muslim communities in the UK. “Mosques publish their income every Friday and they also file annual accounts,” he said, “but Muslim communities are not good at public relations; they live in a different world and they don’t really have an idea about how these things work. Muslims fear the world in the current climate, and the world fears Muslims, but the failure to address the transparency issue affects all the Muslim communities and needs to be dealt with.”