London has a huge opportunity to lead in Islamic finance and in the Sukuk market, the president of the Islamic Development Bank said.
“We have a real opportunity to recognise the potential of Islamic finance here in the UK,” Dr Bandar Hajjar said in a speech at the Sukuk Summit at the London Stock Exchange. “Both the UK government and the IDB are actively promoting this objective.” The Islamic banking industry has grown at a double-digit rate over the last decade, reaching $3.5 trillion last year alone. But despite this growth, Islamic finance has typically been seen as a specialist or niche activity in the West, Dr Bandar said.
Sukuk – an Islamic bond, structured to generate returns for investors while adhering to Sharia, which prohibits taking interest – is a key part of the Islamic finance system. Total international Sukuk issuances reached $95 billion in 2017, after achieving $85 billion the year before, a clear indication the industry is in its early stages and offers “enormous potential for growth” across the world, Dr Bandar said.
Britain is became the first non-Muslim country to issue a Sukuk in 2014. Earlier this year, the UK’s Al Rayan Bank also became the first bank in the world to issue a public Sukuk in a non-Muslim country.
More broadly, the UK has become an increasingly important global centre for Islamic finance. Britain’s Islamic finance industry is now the largest of any OECD country, and there are already five standalone Islamic banks in the UK, along with more than 20 other banks that offer Islamic financial services. “The potential for the future growth of Islamic finance is clear,” Dr Bandar. “London’s emerging role as a hub for Islamic finance is underpinned by historical links with Muslim countries. This will remain strong and get even stronger.” Wayne Evans, adviser in International Strategy at influential financial lobby group TheCityUK, said that Dr Bandar’s confidence in London’s potential to lead in Islamic finance is justified.
“London is the premier Western centre for Islamic finance,” he told The National. “As the world’s leading financial centre, it is ideally placed to help to develop the market for Islamic finance and cater to the growing needs and ambitions of customers and clients in this space.”—Agencies