Govt to issue Islamic bonds
Wednesday, 14 Nov 2007 12:56
The UK is to become the first western nation to issue Islamic bonds, the government announced today.
Sharia compliant sukuk bonds are already issued by a number of firms, but it is hoped the issuing of bonds by the UK government will lead the City of London to become a global centre of Muslim finance.
The first bonds are due to be issued early next year and the government expects the global market to be eventually worth in the region of £250 billion.
Economic secretary Kitty Ussher told BBC Radio 4's Today programme the potential benefits were "enormous".
"There are a huge number of international corporates who are issuing these types of securities and we think 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, because it will send a very strong signal that if you want to do this - whether you're a government or whether you're a company - you should come here to do it."
She added: "This is an increasingly global and liquid market, it's worth £40 billion at the moment. We think it could be worth around £250 billion worldwide eventually."
Details of the sukuk bonds will be unveiled in next spring's budget after a three-month consultation – with Treasury officials to meet with City representatives.
A number of high street banks, including Lloyds TSB, HSBC and a number of specialist lenders, and a number of firms are also providing compliant insurance and investment products.
Under Sharia rules it is forbidden to give or receive interest from an investment and to invest in firms which deal with alcohol, gambling, pornography, some forms of entertainment and standard insurers and banks.
"In Islam we also look at the legal form and not just the substance of the transaction," Sultan Choudhury, commercial director of the Islamic Bank of Britain, told the Today programme.
"With something like a savings account, it doesn't confer a guaranteed rate of interest.
"An Islamic savings account for instance will say, we've got a profit sharing agreement and the bank will make 50 per cent and you'll make 50 per cent and we'll have a target rate of return. And what happens every month is we do a profits calculation and the savers get their share
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Wednesday, 14 Nov 2007 12:56
The UK is to become the first western nation to issue Islamic bonds, the government announced today.
Sharia compliant sukuk bonds are already issued by a number of firms, but it is hoped the issuing of bonds by the UK government will lead the City of London to become a global centre of Muslim finance.
The first bonds are due to be issued early next year and the government expects the global market to be eventually worth in the region of £250 billion.
Economic secretary Kitty Ussher told BBC Radio 4's Today programme the potential benefits were "enormous".
"There are a huge number of international corporates who are issuing these types of securities and we think 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, because it will send a very strong signal that if you want to do this - whether you're a government or whether you're a company - you should come here to do it."
She added: "This is an increasingly global and liquid market, it's worth £40 billion at the moment. We think it could be worth around £250 billion worldwide eventually."
Details of the sukuk bonds will be unveiled in next spring's budget after a three-month consultation – with Treasury officials to meet with City representatives.
A number of high street banks, including Lloyds TSB, HSBC and a number of specialist lenders, and a number of firms are also providing compliant insurance and investment products.
Under Sharia rules it is forbidden to give or receive interest from an investment and to invest in firms which deal with alcohol, gambling, pornography, some forms of entertainment and standard insurers and banks.
"In Islam we also look at the legal form and not just the substance of the transaction," Sultan Choudhury, commercial director of the Islamic Bank of Britain, told the Today programme.
"With something like a savings account, it doesn't confer a guaranteed rate of interest.
"An Islamic savings account for instance will say, we've got a profit sharing agreement and the bank will make 50 per cent and you'll make 50 per cent and we'll have a target rate of return. And what happens every month is we do a profits calculation and the savers get their share
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