UK to launch Islamic Bond
The UK is to become the first non-Muslim country to issue a Sukuk (a Sharia-compliant Islamic Bond). The news was announced by Prime Minister David Cameron at the 9th World Islamic Economic Forum (WIEF) held in London this week (29th to 31st October, 2013). While this week’s forum will cover a range of themes, including banking, technology, infrastructure, education and youth, it will be news of the £200m Sukuk that will grab the headlines in the non-Muslim world. Since interest is not permissible in Islam the £200 bond will offer a fixed return from tangible assets, and will avoid the payment of interest.
Islamic finance is subject to Sharia law which is based on the Quran and its interpretation by religious scholars. In practice, Islamic finance in Cairo in 1942 when scholars started writing on the subject. Under Islamic rules interest must not be charged on loans and must be based on a tangible asset and cannot be derived from gambling or businesses associated with alcohol production or sales, or derived from other practices regarded as ‘sinful’.
There are also plans to create a new Islamic index on the London Stock Exchange. The purpose of the index is inform Islamic investors of which companies match their investment criteria, including deriving profits from tangible assets and avoiding businesses based on forbidden activities. According to the Global Islamic Finance Report 2012 some $1.34 trillion of assets are now being managed according to Islamic investment principles. According to Mr Cameron, London can become the Western centre for Islamic investment and finance, and the bond is being positioned as the first step towards such a goal.