UK to remain ‘Islamic finance hub of the West’
British Economic Secretary to the Treasury says latest Sharia-compliant bond will be Sterling denominated
The United Kingdom intends to remain the “western hub of Islamic finance” as it prepares to launch its second sovereign sukuk, or Sharia-compliant bonds.
"The success of our financial sector is proof we are dynamic country, a country of opportunity uniquely suited to sukuks and Islamic finance,” said John Glen, the British Economic Secretary to the Treasury, at the 2019 London Sukuk and FinTech Summit on Tuesday.
Even after Brexit, Britain will remain committed to international markets, including development of Islamic finance.
“Hopefully you will come to understand, even as our relationship with Europe changes, we will remain committed to international commerce,” he noted.
The UK was the first non-Islamic country in the world to issue a sukuk when it raised £200 million (Dh923.3m) in 2014. The five-year deal is maturing later this month and the government has plans for another Sharia-compliant debt raising through its second sukuk.
The announcement by the UK chancellor of the exchequer, or finance minister, Philip Hammond, two weeks ago, did not give the size or the timing of the new deal, which will replace the facility maturing next month.
Although sparse on details, Mr Glen said the new sukuk will be Sterling denominated, "which should help UK-based Islamic finance institutions meet their mandatory liquidity requirements without extra FX risk”.
“Until recently there was no sukuk outside the Muslim world. Islamic finance evolved ... to [become] a veritable force of financing, the UK stood up, took notice and embraced the opportunity,” he added.
The London Stock Exchange listed its first corporate sukuk in 2007 and its first sovereign sukuk in 2008. Since then, 72 Sharia-compliant bonds have listed in London amounting to $53 billion (Dh194.64bn), with 2018 being a record year with $8.6bn.
Al Rayan Bank, the UK’s largest Islamic bank, issued the largest ever Sterling-denominated sukuk of £250m in February last year.
“We have a single secular regulatory framework to cover Sharia financial products and that’s why we have higher concentrations of Islamic finance activity than any other OECD country,” Mr Glen said. “I believe the London skyline is a testament to that with the Shard, Battersea Power Station and the Olympic Village in Stratford all being funded with the help of Islamic finance.”
“The City of London has always been a beacon, drawing business, capital and talent from around the world. It’s shone even more brightly over the past few decades as we have embraced the energy of Islamic financing. And that beacon will continue long into the future, not dimmed by Brexit but fuelled by Brexit as we move to be a truly global Britain.”
Including Al Rayan, there are five fully Sharia-compliant banks in the UK with assets of $5.5bn as of the first half of last year.
Updated: July 3, 2019 05:25 PM