British government seeks to issue Islamic bonds
14 November 2007
LONDON – Britain said on Wednesday it wanted to become the first Western government to launch Islamic bonds, or sukuk bonds, early next year.
Treasury officials will be meeting experts from the City of London to discuss plans to issue government bonds which are compliant with an Islamic ban on interest.
“This is an increasingly global and liquid market, it’s worth 40 billion pounds at the moment (and) we think it could be worth around 250 billion pounds worldwide eventually,” Treasury minister Kitty Ussher told BBC radio.
“The potential benefits… are enormous,” she added.
“There are a huge number of international corporates who are issuing these types of securities. And…if we can get to the bottom of how to do it as a UK government, that will be great news for the City of London.”
Officials told Reuters on Tuesday there would be a three-month-long consultation into issuing the so-called sukuk bonds, which comply with Islam’s sharia law. They said the aim was to introduce them in the budget next year.
As paying of interest is forbidden under Islamic law, the sukuk bonds pay profits or rent from an underlying asset with the securities representing part ownership of the asset.
The government has been keen to get sukuk bonds started and make the capital a centre for Islamic finance given the huge growth in this area in recent years, particularly as Middle East investors recycle huge oil profits.