Ussher Responds To Sukuk Consultation

by Robin Pilgrim, LawAndTax-News.com, London

03 June 2008

Economic Secretary to the UK Treasury and City Minister Kitty Ussher MP, on Monday delivered the Government's response to the consultation on sterling Sukuk issuance, revealing that it favoured a 'bill-like' Sukuk programme which could be fully integrated with the conventional Treasury bill programme.

Chairing the third meeting of the Islamic Finance Experts Group, Ms Usher said that, were the remaining barriers to be surmountable, a rolling programme of up to around GBP2bn of'bill-like' Sukuk issuance would be achievable over time.

She added that the group will publish a UK strategy paper on Islamic Finance within the next year.

Speaking on Monday, Ms Ussher explained:

"Today's discussion has emphasised both the importance of the Islamic finance sector to the City and the Government's commitment to ensuring the continued growth of this important sector in the future. The Government is determined to maintain its momentum on work on Islamic finance and to make clear to stakeholders its commitment to this industry."

"As such, we want to reiterate our aim to publish a paper detailing the UK strategy on Islamic finance by the end of 2008. This paper would clarify the role of the Government in the development of this sector and importantly, the steps that industry will need to take to ensure that Islamic finance becomes one of the UK's success stories."

Responses to the consultation published this week have enabled the Government to move forward in the evaluation of the costs, benefits and risks associated with a Government sukuk issuance.

The key conclusions from the consultation were presented to the group for the first time on Monday, and stated that:

• The balance of advantages and risks lies with 'bill-like' sukuk rather than 'bond-like' sukuk;
• A rolling programme of up to around GBP2bn of bill-like sukuk issuance would be achievable over time;
• A 'bill-like' sukuk programme would be fully integrated with the conventional Treasury bill programme, which has rolling issuance at 1, 3 and 6 month maturities; and
• The Government would use a 'plain vanilla' Ijara-based structure to facilitate sukuk issuance.

There are still, however, a number of outstanding issues that need answering before the Government would be in a position to announce a decision on whether or not it will issue sukuk.

The Government will continue to work to resolve these outstanding issues and will publish an update of progress in the 2008 Pre-Budget Report, it was announced.

National Savings and Investments also presented the findings of their feasibility study of the Government becoming an issuer of retail Islamic financial products.

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