ISLAMABAD: London has set its sights on becoming the world centre for the Islamic finance industry according to the UK’s foreign office minister for Middle East.
Speaking at The Telegraph’s Middle East Congress, Tobias Ellwood, under secretary of state at the Foreign Office, said the capital had ambitions to stand alongside Dubai and Kuala Lumpur as a global hub for Islamic finance.
Britain became the first country outside the Muslim world to issue an Islamic bond, known as Sukuk, last year, The Telegraph reported Thursday.
The 200m bond attracted healthy investor interest and was the first step in encouraging wider investment from the region to the City of London.
Britain was also committed to promoting a “peaceful and prosperous”
Middle East and expanding trade ties with the region, which topped 35bn last year, said Ellwood.
“We must promote inclusive political participation and job creation across the region,” said the under secretary of state.
“A long-term security strategy must have prosperity at its heart.”
Islamic finance products comply with religious rulings, known as sharia,to pool risk and prohibit traditional interest payments.
There are currently six Islamic banks in Britain, while another 20 lenders currently offer Islamic financial products and services, more than any other Western country.
Chancellor George Osborne has said promoting the Islamic finance industry,which is worth nearly $2 trillion, would help make Britain “the undisputed centre of the global financial system”.
Ellwood also celebrated notable sharia-compliant investments that have been used to fund some of the capital’s largest developments, including The Shard and the Olympic Village.
The sovereign Sukuk market, which makes up only 0.1pc of global financial assets, is predicted to expand by 20pc a year, according Robert Gray, chairman of debt finance at HSBC.
Sukuk provide fixed returns from underlying assets, thus bypassing the Islamic prohibition on receiving interest.
Gray added the recent fall in oil prices would not hinder the industry and could stimulate the issuance of Sharia compliant debt from the likes of Saudi Arabia.
With a depth of reserves, Gulf nations have a “strong capacity to accept more debt and a strong inclination to use Islamic capital markets”, said Gray.