With potentials preceding other European rivals and friendly government policies, the British capital of London is positioning itself as a premier international hub for the booming Islamic finance industry.
"If you want to talk to anyone about Islamic finance, and you're not in the Middle East or Far East, you come to London," Humphrey Percy, head of Bank of London and the Middle East, told the Financial Times on Thursday, June 19.
Over the past few years, London has established a hub status in the field of Islamic finance.
An increasing number of London banks are now offering Islamic banking services to borrowers and savers.
There are four licensed wholesale Islamic banks - the only ones in the European Union.
London is also home to 21 conventional banks offering Islamic products, the newest of which is Gatehouse, which has received its license late April.
"This area is growing rapidly and these new banks draw activity to the UK," says Richard Thomas, who chairs the government's advisory board on Islamic finance.
London-based financial institutions have taken a leading role in developing the market of Islamic bonds, or sukuk, which is estimated to be worth £24 billion globally, from almost nothing five years ago.
The London Stock Exchange has also admitted 16 Islamic bonds to its markets.
Britain is the only Western country among the top 15 for Shari`ah-compliant assets, according to industry group International Financial Services.
Islam forbids Muslims from usury, receiving or paying interest on loans.
Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.
Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.
Potentials
London has the necessary potentials to become the Western hub for Islamic finance.
"It has the right time zone for dealing with Asia and the Middle East, a huge talent pool, and a concentration of diverse markets - the stock exchange, futures, metal, oil," Percy, the head of Bank of London and the Middle East, said.
"Also, the government and the Bank of England have supported Islamic finance."
Over the past five years, the British government has been introducing legislation to nurture Islamic finance.
The government has amended finance acts to ensure that Shari`ah-compliant transactions are not exposed to multiple stamp duty tax breaks granted to certain kinds of interest.
The government is also planning to issue sovereign Islamic bonds.
Another crucial potential for Britain to establish a vibrant Islamic finance sector is its two-million Muslim population.
Thomas, of the advisory board on Islamic finance, believes all such advantages help London to be at "the forefront" in an increasingly-competitive industry.
"That money could go to Bahrain, but we would like it to come to London."
Source: Islam Online (English)
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