London is vying to be the capital of Islamic finance outside of the Muslim world, says the city’s Deputy Mayor Sir Edward Lister.
A task force on building the UK’s Islamic finance industry has been at work since early 2013 and London will host the World Islamic Economic Forum in October.
“The task force has just started and its aim is to make it easier for banks in London to have Islamic products, which is still quite a new concept to any of them,” Lister told a press conference, reported Reuters.
“Only now people are beginning to understand what the products actually mean and how they comply … What you will see is a lot of companies introducing those products.”
Globally, the Islamic finance industry is forecast to be worth $2.6tn (€1.9bn, £1.6bn) by 2017. It has grown by around 30% each year since the millennium and consultancy firm Oliver Wyman predicts that there will need to be at least 150 Islamic finance institutions by 2020 to meet the ever-growing demand.
There are more than 20 UK banks offering Sharia-compliant products, such as HSBC and RBS. There are also three Sharia-only institutions, including the Islamic Bank of Britain (IBB).
By increasing the number of Sharia-compliant financial services in London it will be easier to facilitate investment in the UK from Islamic investors.
What is Islamic banking?
According to IBB’s website: “Islamic banking operates without interest which is not permitted in Islam, as money in itself is not considered to have intrinsic value.
“As interest is income generated from money, it is seen as effortless return. Instead money must be used in a productive way and wealth can only be generated through legitimate trade and investment, which involves an element of risk.
“Islamic banking therefore uses various principles recognised as Sharia compliant such as Ijara (leasing), Musharaka (partnership) and Wakala (agency agreement). Islamic banks use these principles to develop Sharia compliant financial products, such as savings accounts and home finance, which allow Muslims to conduct their finances in an Islamic way.”