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Ed Balls Hosts Islamic Finance Summit

by Philip Morton, Investors

18 April 2007

UK Economic Secretary Ed Balls on Monday 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, Mr Balls observed that:

"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 dialogue with the industry and the government, it emerged following the summit.

Government measures introduced to promote Islamic finance in 2007 include:

  • 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 has 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.

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% in the last year alone.

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