The UK Government has announced plans to test the feasibility of issuing Shariah compliant sukuk bonds. The 2007 Budget introduced new measures for sukuk bonds to be issued, held and traded on the UK financial market. The review of Islamic Finance, announced by the Treasury in April, will test the feasibility of the Government issuing Shariah compliant bonds and increasing the availability of Islamic retail banking products.
Worldwide Islamic financial assets are estimated to be worth $250 billion (US). The Government is keen for Muslims to be to invest their money in the UK, and has announced plans to expand the availability of Shariah complaint Islamic products, to make London the Islamic financial centre of the west.
East Ham MP Stephen Timms - who is also Chief Secretary to the Treasury - said "There is a growing demand, both in my constituency, and across the UK, for Islamic financial products. The Government is keen to enable Muslims to be able to bank, save and borrow, using services that are well regulated and competitive. I hope this review will provide greater access and choice for Muslims requiring financial services."
Sukuk bonds generate credit through a business activity; they do not earn interest on money, making them both riba and gharar compliant. For example, Pakistan has issued a sukuk bond which uses toll receipts from state roads to pay investors.
To feed into the review, HM Treasury has established an 'Islamic Finance Experts Group' to test the feasibility, and work the details, of Government sukuk bonds. The Government is hopeful that this group, which includes key figures in the Muslim community, could be concluded in early 2008.
The Government has also commissioned a review by National Savings and Investment to examine the possibility of the Government becoming an issuer of retail Islamic products - such as Shariah complaint post office accounts. Many high street banks already provide Shariah complaint services and the Government's review will increase choice and competitiveness.