UK government ‘warms to idea of sovereign sukuk’

From The Nation

The UK’s new Conservative-Liberal Democrat coalition government is set to revisit plans to issue the country’s first sovereign Islamic bond, or sukuk, according to a banker advising British leaders on the issue.

Humphrey Percy, the chief executive of the Kuwaiti-backed Bank of London and Middle East, said Mark Hoban, the new UK financial secretary to the treasury, was “prepared to look at it positively” after the Labour government rejected the sukuk idea.

“The previous government concluded that they did not want to do it because there were still uncertainties around the benefits to the government issuing sukuk,” Mr Percy said on the sidelines of the World Islamic Economic Forum. “Things have changed.”

Mohammed Amin, the chairman of the business and economics committee of the Muslim Council of Britain and a member of the government’s Islamic finance advisory team until late last year, said it appeared Mr Hoban was more willing than his predecessor to explore a sukuk issue as long as it made economic sense.

A sukuk is similar to a conventional bond, but typically is backed by assets and complies with Islamic law’s prohibition on charging interest through leasing schemes and other structures.

“I believe personally that the new Conservative government will actually assess this as a pure value-for-money question and if it can be demonstrated that issuing a government sukuk would be value for money, in other words compared with borrowing money conventionally issuing gilts, then I personally believe they would take a positive decision,” he said.

A sukuk may be more expensive for the government to issue, he said, because of the complex nature of the underlying transactions. Yet there could also be more demand for a sukuk than a conventional bond given the global Muslim interest.

Coupled with London’s desire to cement its place as the centre for Islamic finance in Europe along with the UK’s large debt load, political change could breathe new life into the government sukuk idea. Last year, Britain ran up a deficit of £159.2 billion (Dh841.94bn)

Mr Percy said he was hoping for the UK’s first private-sector sukuk to be sold this year, pending a change in tax laws that would pave the way for corporate issues.

Salem Ghandour, an Islamic finance analyst at one of Malaysia’s largest banks, said the UK’s exploration of a sukuk issuance showed a “clear willingness” on the part of governments in Europe to take part in the rise of the industry.

“From a growth perspective, sukuk is very frontier, so increasingly countries are interested in issuing sukuks and having Islamic financial institutions to help them manage those sukuks,” he said.

Also driving the government sukuk review are new regulations that will require UK banks to hold a greater amount of liquid assets in the form of highly rated government bonds starting in October, Mr Percy said. Sukuk issued by the Islamic Development Bank are the only securities that currently meet those criteria for the UK’s five Islamic banks.

3 Replies to “UK government ‘warms to idea of sovereign sukuk’”

  1. To hell with them if they want Islamic style banking let them go back to their 7th century despotic run, religious concentration camps. Most of us in Western Europe , the USA, and Canada are getting sick and disgusted by the pandering , and butt kissing done by our spineless elected representatives who are supposed to represent our interests, crawl and grovel for a few cheap votes. Basically we’ve been had or sold out. These worse than prostitutes, back stabbing blowhards need to be voted out of office.

  2. This is a huge victory for Muslims wanting sharia law in the UK.

    Britainistan is one large step closer to becoming a reality.

    Once Muslims get preferential treatment in financial matters, its game over for the UK. Because any sukuk will discriminate against the kufar when dealing with Muslims.

    And once financial matters are made sharia-compliant, then its pretty much entrenched in the interlocked financial systems and is almost impossible to eradicate without years of legal wrangling.

  3. ‘Market, not methodology’, drives sukuk defaults

    “The occurrence of sukuk defaults is driven by credit risk and has nothing to do with the validity of the sukuk methodology. But the problems associated with restructuring have something to do with sukuk’s inherent complexity, experts said.”

    Excuses, excuses.

    Why would well educated, experienced financial advisors in UK or any Western nation buy into the nonsense presented as Islamic finance when it’s historically documented the prophet of Islam was mathematically challenged/incompetent? Why would these same educated individuals not recognize the danger of submitting to this fiction when recent history shows the West absorbs all risks? Dubai World Said to Stop Paying Interest on Loans

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