Ed Balls, City Minister hosts high level summit on Islamic finance
Ed Balls, City Minister today hosted a summit of Islamic financial services experts and leading members of the Muslim community at No 11 Downing Street.
Speaking after the Islamic Finance meeting, Ed Balls, Economic Secretary said:
"The UK is at the forefront of developments in Islamic Finance. I am keen to capitalise on the momentum gained in Budget 2007 by listening to the industry and ensuring that the Government takes every opportunity to promote innovation and growth in this area. By enhancing the competitiveness of the Financial services sector, through creating a level playing field for Islamic finance products, we are also able to increase choice of, and access to, financial products for Muslims and non-Muslims in the UK."
The summit discussed recent Government Budget measures in this area, and looked at how the business and Islamic community could continue to work with the government to drive Islamic finance forward in the UK.
The Government's aims for Islamic finance are:
- to continue the growth of the global wholesale Islamic finance market in the UK, as part of the city competitiveness agenda being pursued by the Chancellor's High Level Group on city competitiveness; and
- to create a level playing field in alternative finance and investments, such as Islamic finance, in the retail market.
HM Treasury, the Financial Services Authority (FSA) and HM Revenue & Customs (HMRC) will together take forward this agenda and continue their strong and beneficial dialogue with the industry and the government.
Government measures introduced to promote Islamic finance in 2007 are:
- The Budget 2007 introduced new measures for sukuk, enabling them to be issued, held and traded in the same way as corporate bonds. This is expected to increase primary issuance in the UK, and there is also a growing secondary sukuk market in London.
- HMRC have issued guidance alongside the Budget on the treatment of musharaka, a common structure used for Islamic mortgages, and takaful products, to provide more clarity and encourage growth in these markets.
- The FSA on the 6th April 2007 introduced new protections in the housing market for consumers wanting to buy their homes in a way that complies with Islamic law through a Home Purchase Plan (HPP).
- UK Trade and Investment (UKTI) will develop a strategy to make the UK a gateway for Islamic Finance, as part of their wider strategy on promoting London and the UK as an international financial centre.
Background
1. Sukuk is an asset-backed, Shariah-compliant trust certificate. The closest instrument comparable to them in the conventional financial system would be a bond issued in relation to a securitisation. Musharaka is a partnership agreement. Takaful is an Islamic insurance concept which is grounded in Islamic banking transactions.
2. Innovation in Financial services is what keeps London and the UK at the forefront of the global financial industry, and this same drive has seen the City take a proactive role in the growth of alternative financial services and tailored products. One of the largest sukuk to date issued by Dubai Ports was written out of the London office of Barclays Capital in January. And only last month the first billion dollar sukuk to be listed on the London Stock Exchange raised £2.5 billion.
3. Across the UK as a whole the industry is also are beginning to see more innovation in retail Islamic products as diverse as Child Trust Funds, Shariah compliant business loans, and takaful insurance. The UK's Muslim population is in the region of two million people and fully shariah compliant banks have more than 30,000 customers across the UK.
4. Increased availability of these types of financial products is vital to ensuring the Muslim community in Britain has equal access to business opportunities. Banks such as Lloyds TSB, Royal Bank of Scotland, and HSBC are all offering Shariah compliant products, and London is also the home to a fully Shariah compliant retail bank. Since 2003 the Islamic mortgage market has grown to over half a billion pounds - an increase of about 50 per cent in the last year alone.
5. The Chancellor announced in Budget 2006 a commitment to work with the financial sector to establish High-Level Group, with senior representatives from across the financial sector, to develop and support a new strategy to promote London as the leading international financial centre.
6. At the first High-Level Group to Government announced its intention to continue to work with the Financial Services Authority (FSA) and HMRC to modernise the regulatory and tax framework to ensure that it keeps pace with opportunities in markets of traditional UK strength, such as asset management, along with new and innovative areas such as hedge funds and Islamic finance.
7. This was first meeting on Islamic finance to be held at 11 Downing Street. The meeting was chaired by Ed Balls, Economic Secretary to the Treasury, and was attended by:
Attendees:
Yavar Moini, Executive Director, Morgan Stanley
David Testa, Executive Director, West LB
Peter Burnett, Managing Direcor, UBS Investment Bank
Jeremy Fern, Representative of The Rt Hon. The Lord Mayor
Michael Payne, Director, Consumer Banking, Lloyds TSB
Keith Leach, Head of Alburaq, ABC International Bank plc
Arul Kandasamy, Head of Islamic Finance, Barclays Capital
Iqbal Khan, Chair, Business and Economics Committee, Muslim Council of Britain
Mr Suneel Bakhshi, Head of Global Commercial Banking, Citigroup
Amjid Ali, Head of HSBC Amanah
Gerry Deegan, Managing Director Islamic Bank of Britain
John Weguelin, Managing Director, European Islamic Investment Bank
Miyan Mansur Mannan, Vice-President, Credit Suisse
Mohammed Amin, Partner, Price Waterhouse Coopers LLP
Neil Miller, Global Head of Islamic Finance, Norton Rose
Tariq Hameed, Norton Rose
Kevin Milne, Managing Director, International Capital Markets Association
Clive Briault, Managing Director, Financial Services Authority, Susan Haird, Deputy Chief Executive, UKTI
Khurshid Ahmed, Chairman, British Muslim Forum
Sadiq Khan, MP
Shahid Malik, MP
