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First UK sukuk under discussion
The UK may launch its first-ever sukuk - or Islamic bond - in a move to woo oil funds from the Middle East and bolster London's position as a centre for Islamic finance by pulling in a larger share of the $250 billion market.
British Treasury Minister Ed Balls said yesterday that the Treasury and Debt Management Office would look into the cost and benefits of the government issuing Islamic financial products in the sterling market, and publish the results of the study by the end of the year.
"I believe there are great potential advantages for the UK government issuing Sharia-compliant government debt," he said.
"The feasibility study will also be assessing the opportunity for issuing such instruments, taking into account the government's debt management objectives."
It is estimated that the entire Islamic finance sector is worth $250 billion. There is increasing interest in sukuk: the Economist Intelligence Unit reported that the global market has been growing at 45% per annum since 2001.
And there has recently been increasing interest in Islamic finance from clients in Western countries such as the UK.
Earlier this month, Lloyds TSB launched the UK's first-ever Islamic business bank account in a bid to target the estimated 10,000 businesses owned by Britain's Muslim community.
Sharia-compliant financial services are structured according to Islamic law, which forbids the payment of interest and investments in industries such as gambling, alcohol and pornography.
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