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Economic Secretary to the Treasury announces further steps to cement Britain’s position as the Western hub for Islamic finance as she addresses the World Islamic Economic Forum in Dubai.
The Economic Secretary to the Treasury, Andrea Leadsom, today set out further steps to cement Britain’s position as the Western hub for Islamic finance, including announcing that UK Export Finance (UKEF) expects to be able to provide Shari’ah compliant support for British exporters in the next few months, as she addressed the World Islamic Economic Forum in Dubai.
UKEF expects to provide a Shari’ah compliant guarantee for a Sukuk issued by an Airbus customer. This will be the first time UKEF has provided a Shari’ah compliant Sukuk guarantee, and it will be the first Sukuk issued for the aviation sector that has benefited from an Export Credit Agency’s support.
The Economic Secretary also welcomed the Bank of England’s announcement that it will look at establishing shari’ah compliant liquidity facilities to help Britain’s Islamic banking sector grow. A longstanding challenge faced by Britain’s Islamic banking sector is its ability to ensure its banks have sufficient liquidity due to the limited stock of assets Islamic banks can hold which are both high quality and shari’ah compliant.
Having access to the Bank of England’s liquidity facilities is a potential way to solve this problem, but unlike other banks, Islamic banks are currently unable to use these facilities because they involve interest, which is not shari’ah compliant.
The Bank of England will therefore assess the feasibility of establishing shari’ah compliant facilities to help Britain’s Islamic banks meet their liquidity obligations and expand the services they can offer customers.
This builds on the progress the government has already made in cementing Britain’s position as the western hub for Islamic finance.
In October 2013 London hosted the first World Islamic Economic Forum to be held outside of the Islamic world. And following the Prime Minister’s announcement at that forum, in June this year Britain became the first country outside of the Islamic world to issue sovereign Sukuk, the Islamic equivalent of a bond.
The government sold £200 million of Sukuk, maturing on 22 July 2019, to investors based in the UK and in the major hubs for Islamic finance around the world. Britain’s first sovereign Sukuk received very strong demand, with orders totalling around £2.3 billion. Allocations have been made to a wide range of investors including sovereign wealth funds, central banks and domestic and international financial institutions.
The Economic Secretary to the Treasury Andrea Leadsom said:
A key part of the government’s long term economic plan is making Britain the western hub for Islamic finance and the undisputed centre of the global financial system.
The UK has already created one of the most attractive regulatory and tax systems for Islamic finance anywhere in the world, and the huge success of the UK’s sovereign Sukuk earlier this year was a significant milestone in the development of the global Islamic finance industry.
I’m delighted to build on this success today by announcing that the Bank of England will look at the case for establishing a shari’ah compliant facilities, and that UK Export Finance will soon move into the Sukuk market.