The Kuwaiti bank will own 20 percent of the Bank of London and Middle East, which won a licence to offer banking and investment services, Boubyan said in a statement.
It said its investment amounted to 28.6 million pounds.
A Boubyan Bank official told Reuters the Kuwaiti lender would be the biggest shareholder of the British bank.
Islamic banking complies with the religion’s ban on lending on interest and offers Muslims investments that avoid prohibited activities such as dealing in pork, alcohol or gambling.
Although much of the growth of Islamic banking in the past few years has been driven by demand in the Gulf Arab region, more Muslims in the West are seeking financing and investment that follow the rules of sharia, or Islamic law.
Britain wants to turn London into a centre for Islamic finance and is studying the possibility of selling Islamic bonds, Treasury Minister Ed Balls said in April.
Shares in Boubyan Bank were trading lower on Sunday, although they pared some losses after the news. At 0845 GMT the stock was down 3.95 percent at 0.730 dinars.
