UK confirms commitment to Islamic finance
Islamic finance

The UK has a track record of supporting Islamic finance, with UK firms having been involved since the 1980s

By HABHAJAN SINGH

The UK can play the role of a “neutral partner” in bringing together market participants from around the world with a stake in developing Islamic finance and Shariah-compliant products, said one of its lawmakers.

“The UK is already home to the largest Islamic finance market outside the Muslim world and we have seen a solid take-up of products by UK consumers of all faiths over recent years, but there is room for further growth,” said Mark Field, a UK MP who was recently appointed minister of state for the Foreign and Commonwealth Office.

“However, the potential for Islamic finance in the UK goes well beyond retail markets; it makes an important contribution to UK services exports and makes the UK more attractive to foreign investment. The UK is ideally placed to play a leading role in the development of Islamic finance globally,” he said in an interview published in the maiden issue of the UK Islamic Finance.

Among others, he had referred to the UK playing host to senior policymakers for the annual meeting of the Global Islamic Finance and Investment Group (GIFIG), first convened in 2014.

In a news story released by the UK Treasury, it said the meeting, co-chaired by Field and the UK economic secretary to the Treasury Stephen Barclay, discussed cross-border cooperation to further boost the global Islamic finance industry.

“This year’s meeting of GIFIG looked at areas where countries with an interest in Islamic finance can work better together to support the development of the industry. Discussions also covered responses to the industry’s on going market and regulatory challenges and synergies between Islamic and other areas of finance,” the statement added.

It noted that the UK has a track record of supporting Islamic finance, with UK firms having been involved in Islamic finance since the 1980s and the UK has been at the forefront of key developments in Europe ever since.

“The UK today is one of the few jurisdictions worldwide that accommodates Islamic finance within a single and secular regulatory framework. There are now over 100,000 Islamic finance retail customers in the UK, benefitting from Shariah-compliant current accounts, home finance, savings, investment and other products,” it said.

The enthusiasm for Islamic finance could also be seen with the second Global Ethical Finance Forum 2017 which took place in Scotland on Sept 13-14. Among others, the forum participants discussed the lure of green bonds and green financing.

Most of the growth of Islamic finance in the UK has taken place in the early 2000s, but the existence of Shariah-compliant transactions in the London financial markets goes back to the 1980s.

Retail Islamic products first appeared in the UK in 1990s, but only on a very limited scale. A few banks from the Middle East and South-East Asia began to offer simple products such as home finance, according to one Islamic finance report released by the UK Financial Services Authority in 2007.

In 2014, for example, it became the first country outside the Islamic world to issue a sovereign sukuk, the Islamic equivalent of a bond.

Now, London has more than 20 international banks operating in Islamic finance — five of which are fully Shariah-compliant. It also has more than 20 law firms — with offices in the UK — supplying legal services related to Islamic finance for global and domestic markets.

In the interview, Field said the UK will continue to look at issues that prevent Shariah-compliant products from bene- fitting from a level-playing field.

“An important tenet of our strategy on Islamic finance is that nobody in the UK should be denied access to competitively-priced financial products on account of their faith,” he said.

“We will also continue to look at any features of specific pieces of legislation or tax treatment where Shariah-compliant financial products are still not able to compete on a level-playing field.”