In his speech at the World Islamic Economic Forum today, David Cameron will say that the Treasury is working on the practicalities of issuing a sukuk worth around £200m as early as next year.
The sukuk proposal will sit alongside a raft of measures, designed to cement Britain’s place as an important hub for Islamic finance in Europe, and position it to compete with other global financial centres like Dubai.
Cameron is also set to announce the introduction of the world’s first Islamic financial index, to be listed on the London Stock Exchange (LSE). The Islamic Market Index will allow investors to easily identify companies that meet traditional Islamic investment principles, and screen financial ratios to find lower volatility investments.
Treasury officials investigated the possibility of issuing an Islamic sovereign bond denominated in pounds in 2007, but closed the door on the idea in 2011, stating at the time that “it is judged not to provide value for money.”
The market for Western sovereign bonds is effectively closed for sharia-compliant investors because of restrictions on the charging of interest.
Speaking before the plans were known, Abdulaziz Al Duweesh of London’s Islamic Gatehouse Bank, said that “issuing sukuk would not only be of enormous symbolic importance, but it would open up the world of Western sovereign debt to Islamic investors, allowing them to diversify to a far greater extent.”