The British government unveiled plans to issue the first Islamic bond outside the Islamic world on Monday, as it seeks to transform London into “one of the great capitals of Islamic finance.”
The British Treasury is planning the £200-million Sukuk bond issue in the New Year, while the London Stock Exchange will launch a new Islamic index – which will identify companies that meet Islamic investment principles.
Speaking at the World Islamic Economic Forum in London, Prime Minister David Cameron said he hoped these and other initiatives would help propel London to stand alongside Dubai as a centre for Islamic finance, and fuel investment into the country.
“When Islamic finance is growing 50 per cent faster than traditional banking…we want to make sure a big proportion of that new investment is made here in Britain.”
The government’s focus on Islamic finance is not surprising. According to a recent report by Ernst and Young, global Islamic banking assets held by commercial banks are growing rapidly – $1.8 trillion in 2013 from $1.3 trillion two years ago.
PWC estimates the global Islamic finance market will reach $2.6 trillion by 2017. So far, the market for Islamic finance is concentrated in seven markets including Saudi Arabia, Kuwait, UAE, Bahrain, Qatar, Malaysia and Turkey.
Middle Eastern investment into the UK has been soaring: Qatar holds a 95 per cent stake in The Shard, the tallest building in Western Europe, which was opened near London Bridge station last year while Dubai’s DP World is in the midst of building London Gateway, a major deep sea container port for Europe.
Investment has also been pouring in from other Islamic nations: a group of Malaysian companies are redeveloping Battersea Power Station, a building on the Thames that had stood empty for two decades.
The push to make London an Islamic finance hub should also be seen in the content of a wider drive by the government to broaden and diversify the City of London, which has been gradually rebuilding its identity since the 2007 financial crisis.
China has also become a major focal point. Last year Britain signed a deal with the Hong Kong Monetary Authority to turn London into a major international trading hub for Renminbi, and earlier this month the Treasury unveiled plans to allow Chinese banks to open wholesale branches in the UK.