Muslim money: Britain first Western country to issue Islamic bonds
In an effort to attract a booming class of wealthy Muslim investors, Britain will be the first non-Islamic country to issue sovereign Islamic bonds, Prime Minister David Cameron has announced on Tuesday.
Islamic finance is an opportunity not to be missed: Islamic
investments have jumped 150 percent in the last seven years, and
are due to be worth $2.1 trillion (£1.3 trillion) by 2014;
Cameron told the World Islamic Economic Forum in
London on Tuesday.
The plan has been in the works for many years in the hope it will
make London and Britain more Islamic investment-friendly. The
state attracted a lot of Islamic investment in Olympic
infrastructure.
The Treasury, endorsed by Chancellor Osborne, announced it will launch £200 million (about $320 million) worth of Islamic bonds – called sukuk – as early as next year. The first sukuk bonds were issued by Malaysia in 2000.
The bonds will be structured in compliance with Islamic Sharia
religious law, which prohibits collecting and paying interest on
loans.
On the London Stock Exchange, bonds will likely be backed by
property- either rental or government.
Already one of the world’s leading finance centers – London -
will try to capitalize on the strong growth in the Islamic finance sector, and
become a leading player.
David Cameron said London will open a new Islamic bond index on
the London Stock Exchange (LSE) to help stimulate fixed-income
investments from places like Dubai, and Malaysia. Already sukuk
bonds have been explosive on the LSE, as it has hosted over $34
billion in sukuk in the last five years, according to 10 Downing
Street.
London will become the “unrivalled western center for Islamic
finance,” Osborne said.
The new Index will help Muslim investors identify which listed
companies follow Islamic bond law. For example, investors that
practice Islamic bond law won’t invest in companies that are
linked to alcohol or gambling.
"I want London to stand alongside Dubai as one of the great
capitals of Islamic finance anywhere in the world," Cameron
said.
The decision comes on the heels of the government’s decision to ease regulations for Chinese banks to
set up offices in London, as well as allow direct currency
exchanges between London and Beijing.
