Britain's treasury announced Monday that it favored wading into the world of Islamic finance, saying it wanted to eventually raise some 2 billion pounds (US$4 million; €2.6 million) through Shariah-compliant bonds.
But it warned that some obstacles would still have to be overcome before the government made a final decision on the matter.
The British government has been looking for ways to tap into the market for Islamic finance, whose rapid expansion has been driven by soaring energy revenues in the Persian Gulf and Muslims' preference for the growing range investment products allowed under the Shariah, an Islamic code of law drawn from the Quran and other sources.
London — already home to the largest Islamic finance market in the Western world — is particularly interested in consolidating its head-start in the area.
Economic Secretary Kitty Ussher said the British Treasury was leaning toward the idea of issuing sukuk, or Islamic bonds, through the government's conventional bill program.
Normal bonds pay interest and are therefore forbidden by Shariah, which condemns usury. But sukuk work like investment certificates, giving buyers a proportional share of an underlying physical asset, such as leased land, as well as the income that it generates. The process is normally blessed by a board of religious scholars affiliated with a bank.
Ussher said that the sukuk would be fully integrated into the Treasury's bill program, which issues interest-bearing bills at one, three and six month maturities, and could raise 2 billion pounds (US$4 million; €2.6 million) "over time."
But she added that "outstanding issues" to the issuance of sukuk were still to be resolved. She did not elaborate, saying a government strategy paper on Islamic finance would be published within the next year.
Source: IHT (English), h/t Weasel Zippers
See also: France: Paris as center of Islamic finance, UK: First independent Islamic insurance company, UK: Growth in Sharia mortgages, UK: Sharia compliant money transfer service