The Islamic Bond: Dawn of a New Era
In a blaze of publicity PM David Cameron announced the launch of the Islamic bond (sukuk) at the World Islamic Economic forum in London this week.
The British government has envisaged the creation of a global Islamic finance hub for a considerable period of time since former PM Gordon Brown boldly declared that he wanted London’ to become the undisputed ‘Islamic finance capital of the world’ with the aim of competing with Dubai and Kuala Lumpur for this prestigious accolade.
It has been said that the Islamic investment sector has become a lucrative one in recent times. Statistics show that since 2006 that there has phenomenal growth in this area so much so that the estimated value of these products is worth a staggering £1.3 trillion pounds and the success story is set to continue. It is not surprising to see that PM David Cameron has stressed that the UK needs to tap into this rather lucrative market and that it is an opportunity not to be missed.
The British government is keen to stress that it wants the UK to attract more investors to purchase these bonds and its open door policy is undoubtedly part of a drive to make the country Islamic investment friendly. HM Treasury under the auspices of the Chancellor of the Exchequer George Osborne has declared that it will launch £200 million pounds worth of bonds in order to entice investors from all over the world.
These Islamic bonds are commonly known as Sukuk and were initially issued by the Malaysian government in 2000.
The Islamic bonds or Sukuk will be offered with the promise that they will be structured in accordance with Islamic law (Sharia) giving assurances to investors that they will be free from Interest (riba). There is an increased likelihood that the UK Islamic bond will be made available on the London Stock Exchange (LSE) through rental or government property portfolios.
In a time of such economic uncertainty, the UK government is keen not to get left behind the emerging powers of the east such as India and China and is embracing change as a direct result of the headwinds of globalisation.
Writing in the Financial Times (FT), George Osborne said: While others in the western world resist change, this government is embracing it: banging the drum for British businesses, seeking out new markets, welcoming overseas investment with open arms’.