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Mon 18 Oct 2010 11:59 AM

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UK government ‘seriously considering’ first sukuk issue

London-based sharia lender Gatehouse Bank says first UK sovereign sukuk in pipeline

UK government ‘seriously considering’ first sukuk issue
Fahed Boodai, co-founder and chairman of Gatehouse Bank

The British government may issue its first sovereign sukuk, or Islamic bond, by the end of the year, the head of a London-based Islamic lender has said.

“They are seriously considering it,” said Fahed Boodai, co-founder and chairman of Gatehouse Bank, a subsidiary of Kuwait’s Global Securities House.

When asked if an issuance is likely this year, he said; “I hope so.”

Gatehouse is a member of the UK Islamic Finance Secretariat, a group of Islamic banks and British government bodies. The group was established to bolster the sharia banking sector in the UK and to lobby for the issuance of the first UK sovereign sukuk.

“Part of our developing business agenda is encouraging the UK government to issue a sukuk,” James Bagshawe, chief operating officer at Gatehouse, said at the time.

Boodai said he was optimistic an issue could be made this year as the sector has won the backing of a number of high-profile British government officials.

“Two weeks ago I had dinner with Lord Sassoon [Commercial Secretary to the UK Treasury] and we exactly discussed this and he said: ‘Is there a difference in price?’ I said; ‘No, there shouldn’t be as it is the same risk for the UK government’ and he was taking notes with his head of debt for the government on reengaging this process,” Boodai said.

London is Europe’s most sophisticated Islamic finance market. Last year the London Stock Exchange listed 25 sukuk, which raised a combined total of £9.1bn ($14.5bn) - the largest combined value after the Nasdaq Dubai.

“The City of London and the Lord Mayor’s office have been very welcoming to us. The current mayor Nick Anstee made a trip to the United States promoting our industry. It says a lot when you have the Lord Mayor visiting the US promoting Islamic finance,” Boodai said.

The trillion dollar Islamic finance industry was dealt a blow last year when Dubai World asked for a delay in repaying $26bn in debt. A $4.1bn sukuk from its real estate unit, Nakheel, staved off default thanks to a rescue package from Abu Dhabi, and the crisis raised questions over the safety of Islamic finance.

The debt crisis was a learning curve for the industry, said Boodai.

“It had a small punch I would say, but not a significant knock out and actually people are reengaged in this process of sukuk or Islamic debt instruments,” he said. “It is still a learning curve and what has happened has probably been a great lesson and for a new chapter to open for these instruments.”

Established in May 2007, Gatehouse has been authorised to operate in London by the UK Financial Services Authority since April 2008.

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