Islamic Finance in UK Continues To Make Progress

The UK Government re-affirmed its commitment to develop the UK as a global centre for Islamic finance in a report released yesterday.

The report from the Financial Services Trade and Investment Board (FSTIB), a body which was created by the Chancellor two years ago and charged with further strengthening Britain’s position as a key international financial centre by means of nine key initiatives. One of these initiatives was the development of the UK as a global centre for Islamic finance.

Islamic finance in the UK

The reports states the UK is already recognised as a leader in Islamic finance outside the Muslim world. The UK’s reported volume of Islamic assets is more than $19 billion, including several well-known construction projects such as the Shard, the Olympic Village, and the redevelopments of Chelsea Barracks and Battersea Power Station.

The UK has five banks dedicated to Islamic finance, over 20 banks offering Islamic products, and 25 law firms with Islamic finance units. There are $38 billion of sukuk listed in London, primarily issued by corporates and banks based in the Middle East.

The government is committed to further encouraging the growth of Islamic finance in the UK and ensuring that the UK becomes the Western centre of expertise in Islamic finance, as well as home to many Islamic investments. Over the last year, the UK has made substantial progress in developing further its Islamic finance offer, including:

• The issue of £200 million worth of sovereign sukuk in June 2014, the first sovereign sukuk issue outside the Islamic world. The issuance cemented Britain’s position as the leading western hub for Islamic finance, and demonstrated that the government has successfully created the necessary regulatory and tax framework for Islamic finance.
• The Bank of England announced that it will assess the feasibility of a Shariah-compliant liquidity facility, which aims to help Islamic banks to manage their operations more effectively
• The government’s ongoing work to develop other Shariah-compliant products, such as student and start-up loans, which will increase consumer choice and help deliver a truly inclusive economy
• The recent announcement that UK Export Finance, the UK’s Export Credit Agency, is expecting to provide its first Shariah-compliant guarantee for sukuk issued by a customer of Airbus
• In February, the Rt Hon Hugo Swire MP, Minister of State for the Foreign and Commonwealth Office, chaired the second meeting of the Global Islamic Finance and Investment Group (GIFIG). The meeting focussed on improving global understanding of Islamic finance and encouraging Shariah-compliant investment in infrastructure

 

Looking Ahead

In the coming year, the government will continue its policy to strengthen and grow the UK’s Islamic finance market with a focus on three key themes. First, enhancing liquidity provision in the UK’s Islamic finance market to encourage greater competition and levels of efficiency. Second, ensuring the UK takes advantage of the natural synergies between Shariah-compliant financing structures and the growing demand for infrastructure financing. Third, enhancing understanding of Islamic finance principles and processes to ensure that businesses and consumers are better equipped to make informed decisions on Islamic finance.

Download the full report:  Financial Services Trade and Investment Board: annual report 2014-2015 (1.2MB)