Britain aims to be 1st Western country to issue sovereign Islamic bond

LONDON-Reuters

British Prime Minister David Cameron addresses the delegates during the 9th World Islamic Economic Forum at the ExCeL exhibition center in London. AP photo

Prime Minister David Cameron made a bid to position London as a leading hub for Islamic finance Oct. 29, announcing plans for Britain to become the first Western country to issue a sovereign sukuk, or Islamic bond.

The planned issue, worth around 200 million pounds ($323 million) and expected next year, would be much smaller than an originally planned sukuk but would provide a much-needed liquidity management tool for Britain’s six Islamic lenders and could encourage local firms to consider issuing sukuk of their own.

Britain’s push to promote itself as a leading Islamic finance hub comes as competition heats up with other financial centers in Asia, led by Malaysia, and in the Middle East.

Britain first announced plans for a sovereign sukuk five years ago but that issue never materialized as the country’s Debt decided the structure was too expensive.

The new proposal is less than a fifth of the size of the original and is designed to boost London’s status rather than to diversify Britain’s investor base.

“I don’t just want London to be a great capital of Islamic finance in the Western world, I want London to stand alongside Dubai and Kuala Lumpur as one of the great capitals of Islamic finance anywhere in the world,” Cameron told the World Islamic Economic Forum being held in London.

Sukuk are investment certificates which follow religious principles such as a ban on interest and gambling.

The global Islamic banking industry is expected to tip $1.8 trillion by the end of this year, according to consultancy Ernst & Young, and is starting to attract interest among big Western banks because of rapid growth of trade involving wealthy Gulf economies.