The United Kingdom aims to be the first country outside the Muslim work to sell bonds that are Shariah-compliant, according to the UK Prime Minister, David Cameron. In London, Cameron spoke on intentions of rolling out Islamic bonds, called sukuk, worth £200 million at the World Islamic Economic Forum.
Originally, the sukuk program was intended to be much larger and incorporated into the United Kingdom’s regular financing program. The reduced issuing size is said to have a much wider benefit, including stoking activity in the Islamic finance industry. Offering Islamic bonds outside the Muslim world has been talked about but never has come to fruition. Prime Minister Cameron said “changing that is a question of pragmatism and political will. And here in Britain we have got both. This government wants Britain to become the first sovereign outside the Islamic world to issue an Islamic bond.”
A reduced offering is believe to be further beneficial resulting in a lower yielding bond than a larger supply.
Sukuk is backed by cash and easy-to-sell assets due to the restriction of interest by the Islamic law. Britain’s issuing of these bonds could serve a great purpose by allowing access of these assets by Muslims outside the typical jurisdiction. Nearly 60 percent of all sukuk are issued by Malaysia.
The United Kingdom is currently the largest center for Islamic finance outside the Islamic world. Cameron offered encouraging words at the World Islamic Forum, “today our ambition is to go further still. Because I don’t just want London to be a great capital of Islamic finance in the western world, I want London to stand alongside Dubai and Kuala Lumpur as one of the great capitals of Islamic finance anywhere in the world.”
PricewaterhouseCoopers LLP reports that Islamic financial assets are growing at an impressive 17 percent annually, currently at $1.21 trillion. Assets are expected to grow to $2.67 trillion by 2017.