Positioning his country as hub for Islamic finance, British Prime Minister David Cameron announced Tuesday that the UK is preparing to issue bonds compliant with sharia law, the first non-Muslim country to do so.
Besides announcing the launching of an Islamic bond – or “sukuk” - the prime minister announced plans for a new “Islamic Market Index” on the London Stock Exchange during a talk at the World Islamic Economic Forum (WIEF) meeting in London, the BBC reports.
Cameron's goal is to attract investors from the Muslim world by creating investment vehicles in keeping with their faith. Under sharia rules, no charging of interest on business deals is allowed. Neither is investing in businesses related to gambling or alcohol.
The Daily Telegraph explains that sukuks avoid the interest challenge “by ensuring the fixed return investors receive on the debt is linked to the profit generated by an underlying asset.”
"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 as one of the great capitals of Islamic finance anywhere in the world," Cameron said.
“For years people have been talking about creating an Islamic Bond, or sukuk, outside the Islamic world, but it’s never quite happened. Changing that is a question of pragmatism and political will, and here in Britain, we have got both. This government wants Britain to become the first sovereign outside the Islamic world to issue an Islamic bond,” Cameron said.
He characterized plans for the Islamic Market Index as “yet another reason why London can be one of the great centers of Islamic finance anywhere in the world.”
"There are some countries which naturally look inwards, pull up the drawbridge and refuse to recognize that the way the world is changing affects their future success. But Britain will not make that mistake," the prime minister said.
“Mr. Cameron believes that Islamic finance is a good opportunity for the UK's financial services industry as Islamic investments have soared by 150% in the past seven years and are expected to be worth £1.3 trillion [$2.09 trillion] next year,” writes the BBC.
The BBC reports that the British Treasury aims to launch the Islamic bond worth £200m [$320m] next year.
The World Islamic Economic Forum included leaders from the Muslim world such as Jordan’s King Abdullah and Afghan President Hamid Karzai. This is the first time the forum has convened in a non-Muslim country which according to The Daily Telegraph “highlights the growing role London is playing in the Islamic finance industry.”