(Reuters) – The scope of Britain’s Islamic finance market is widening with several initiatives from the government and private sector, although the country is about to lose one of its six full-fledged Islamic banks.
In June, Britain became the first Western country to sell sovereign sukuk (Islamic bonds), helping boost its industry credentials as competition intensifies among global financial centres for a slice of Islamic business.
Britain has 22 firms that offer sharia-compliant financial products and they held an estimated $19 billion in assets last year, according to a report by lobby group TheCityUK. These include six full-fledged Islamic banks such as Bank of London and the Middle East, European Islamic Investment Bank , Gatehouse Bank and the Islamic Bank of Britain (IBB).
Last week a government official said the central bank would look into developing a liquidity management tool for use by Islamic banks, while Britain’s export credit agency expects to guarantee sukuk for the first time next year, an issue by a customer of European plane maker Airbus.
In May, the Bank of England widened the types of sharia-compliant debt instruments that Islamic banks can use in their liquidity buffers, under a policy statement known as PS4/14.
Islamic banking accounts for only a tiny fraction – less than 1 percent – of the British banking sector, far below the share of roughly a quarter seen in the Gulf.
But taken together, the new official initiatives seem likely to create a more benign environment for Islamic finance, allowing banks to operate more flexibly and efficiently, and therefore more cheaply. Depending on how quickly it moves ahead, the plan for the liquidity management tool could conceivably put Britain ahead of some Gulf countries in providing options in this area.
Read more at Reuters
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