Bahrain-UK: joining forces on Islamic finance – April 2014
Published 16 April 2014
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Bahrain has long been an innovator in Islamic finance and, according to the most recent Thomson Reuters survey of Islamic financial centres, is the second most developed centre after Malaysia. Most of the Islamic finance regulatory bodies are located in either Bahrain or Kuala Lumpur. Bahrain has the highest concentration of Islamic banks in the Middle East: 26 banks with total assets of over US $25bn. This figure does not include the numerous conventional banks with Islamic banking divisions.
The UK-Bahrain Islamic Finance Summit was first mooted in the margins of the World Islamic Economic Forum in London, when the Crown Prince Salman led a high-level Bahraini delegation. There was a clear message, first set out by Baroness Warsi during her visit here last September, that the UK recognised Bahrain’s important role in Islamic finance and that we wanted to work together to develop the UK’s Islamic finance offering and as part of increasing cooperation with Islamic finance centres.
During the World Islamic Banking Conference here in December, where the UK was a partner nation and UKTI hosted a session to promote the UK’s Islamic finance offering, we highlighted the UK’s commitment to support the growth of the domestic Islamic finance market and the UK as a global Islamic finance partner. This message was reinforced during the visit by the Lord Mayor of the City of London in February. The inaugural meeting of the Global Islamic Finance and Investment Group (GIFIG) in London on 26 March was attended by two senior Bahraini representatives, the Governor of the Central Bank of Bahrain and the President & CEO of Al Baraka Banking Group, one of the largest Islamic banks in Bahrain. The Governor will lead the Bahraini delegation on 8 April.
The timing of the Summit so soon after the GIFIG meeting sends a strong signal that we want to build on these recent initiatives and ensure that we realise our ambitions for the UK to play an even more active global role in Islamic finance, and that we see Bahrain as an important partner. Panel discussions will focus on investment (how Islamic finance can facilitate investment opportunities in both directions and what more we can do to support further investment), education (promoting excellence in Islamic finance education, where the UK has much to offer and building on existing initiatives, eg between the Bahrain Institute for Banking and Finance and Bangor University), and regulation (how we make sure the conditions are right for Islamic finance to mainstream even further, taking into consideration the opportunities and challenges of issuing a sovereign sukuk).
An MOU will be signed at the Summit. The key elements include enhancing UK-Bahrain education partnerships, the establishment of a UK/Bahrain Islamic Finance Working Group, and exploring an internship exchange programme.
The strength of the Islamic finance sector in Bahrain, and associated expertise, provides a good opportunity for the UK to continue to develop its Islamic finance model with support from Bahrain and thus help to ensure that London builds on its reputation as a respected Islamic finance player. Bahrain was the first country in the world to develop and issue an international sovereign sukuk (in 2001), marking the start of the GCC Islamic capital market. With the UK’s preparations well under way to issue its own sovereign sukuk, we can benefit from dialogue and cooperation with the Bahrainis The Bahrainis are equally keen to develop Islamic finance relations with the UK. It will help them to develop their own market. But they also want to develop common standards between international Islamic finance practitioners. Also, identifying new approaches to financing investment projects is a priority.
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