By:  Global Economics Reporter, Published on Tue Oct 29 2013
Country to become first western nation to issue Islamic bonds, Prime Minister David Cameron tells World Islamic Economic Forum in London.
British Prime Minister David Cameron, right, attends a leader's lunch at the 9th World Islamic Economic Forum in London on Tuesday.

BETHANY CLARKE / GETTY IMAGES – British Prime Minister David Cameron, right, attends a leader’s lunch at the 9th World Islamic Economic Forum in London on Tuesday.

British Prime Minister David Cameron wants London to be alongside Dubai and Kuala Lumpur as one of the great Islamic financial capitals of the world.

Speaking at the World Islamic Economic Forum in London on Tuesday, Cameron announced Britain will be the first western nation to issue sovereign sukuk or Islamic bonds. Sukuk comply with sharia, the Islamic religious laws, which don’t allow the charging or paying of interest. Instead, the bonds give investors profits from the assets.

The issue, which is £200 million or $337 million, is considered small and is said to be more a political move, signalling to investors that Britain wants to a piece of the Islamic financial market.

“When Islamic finance is growing 50 per cent faster than traditional banking, and when global Islamic investments are set to grow to £1.3 trillion ($2.2 trillion) by 2014, we want to make sure a big proportion of that new investment is made here in Britain,” Cameron told the forum.

This is the first time the conference, a meeting of 1,800 people from 115 countries, has been held in a non-Islamic nation. A number of world leaders attended, including King Abdullah of Jordan and the sultan of Brunei.

Britain should not shy away from foreign investments and pull up the “drawbridge,” as others have done, Cameron said.

“I know some people look at foreign companies investing in our businesses, financing our infrastructure or taking over our football clubs and ask: ‘Shouldn’t we do something to stop it?’ Well, let me tell you, the answer is ‘No,’ ” Cameron said.

Middle Eastern investment is growing throughout Britain. Last November, Emirates international airlines penned a $253-million deal granting it a five-year extension to its agreement with the Arsenal Football Club, and Qatari investment is building the tallest skyscraper in Europe, the Shard, in London.

Britain has already removed the double tax on Islamic mortgages and extended tax relief on mortgages to companies as well as people.

“Never again should a Muslim in Britain feel unable to go start a business because they cannot get a start-up loan, simply because of their religion,” Cameron said.

Cameron said the London Stock Exchange Group is also creating new indices that identify companies that meet traditional Islamic investment principles.

British Chancellor of the Exchequer George Osbourne said in a Financial Times column posted Monday that now is the time to “cement the U.K.’s reputation” in the Islamic world.

“A quarter of the world’s population is Muslim but only 1 per cent of the world’s financial assets are sharia compliant. Across the Middle East and North Africa, less than 20 per cent of adults have a formal bank account. That gap presents a huge economic opportunity for the U.K.,” he wrote.

Canada would do well to learn from Cameron, said Jeffrey Graham, a lawyer with Borden Ladner Gervais, head of the firm’s financial services regulatory practice.

“I think Islamic finance is a tremendous opportunity for Canada. We have much to learn with what the English are doing — what they have done, very successfully, in terms of changing investment flows and positioning themselves as a partner,” said Graham, who was in Dubai speaking at an event organized by Dubai Exports that focused on promoting exports to Canada.

Five years ago, the British mulled the prospect of issuing sovereign sukuk, but the issue was put on the back burner as Europe became consumed with the 2008 global financial collapse.

“Islamic finance is still a young industry but growing rapidly in the context of global financial activity,” Graham said.

“Cameron is sending a signal to the markets, saying he is willing to help. We could be doing that.”