FINANCIAL TIMES: The government will step up preparations this week for the launch of sharia-compliant bonds, known as sukuk, as it seeks to turn London into the world centre of Islamic finance.
Kitty Ussher, the Treasury minister, will tell City leaders she is launching a three-month consultation process and could use next spring’s Budget to put in place any legal changes that might be needed to launch the first western government sukuk.
Ms Ussher believes that the scheme will entrench London as “a global gateway to Islamic finance” and help Britain’s Muslims, who sometimes struggle to find sharia-compliant retail products such as mortgages.
The bonds could be used as vehicles to allow Muslims in Britain to invest in National Savings products through banks and post offices.
Islamic bonds are structured to pay profits or rent from an underlying asset or business, rather than interest, which is outlawed under sharia religious law.
Unlike conventional bonds, sukuk are akin to Islamic “investment certificates” representing ownership in the underlying asset. Returns are paid to investors in line with their proportional ownership.
The sukuk market has grown dramatically in the past five years. Nearly $40bn (£19.1bn) of these bonds have been issued this year, from virtually nothing in 2001. UK Treasury paves way for Islamic bonds (more) By George Parker, Lina Saigol and David Oakley
Mark Alexander
