London aims to become Islamic finance hub

London, NU Online
British Prime Minister David Cameron said Monday that London aims to become a top capital of Islamic finance as the city played host to the first World Islamic Forum outside the Muslim world.<>

“Already London is the biggest center for Islamic finance outside the Islamic world. And today our ambition is to go further still,” Cameron told more than 1,800 political and business leaders at the ninth forum, dubbed the “Davos of the Muslim world.”

“I don’t just want London to be a great capital of Islamic finance in the Western world, I want London to stand alongside Dubai and Kuala Lumpur as one of the great capitals of Islamic Finance anywhere in the world,” he said as quoted by AFP. “Investing in London is good for you and opening London up to your investment is good for us.”

More than 20 UK banks currently offer Islamic financial products, while 49 Islamic bonds — called sukuks — with a total value of $34 billion, have been listed over the last five years on the London Stock Exchange.

But Cameron aims to expand well beyond this.

“When Islamic finance is growing 50 percent faster than traditional banking and when global Islamic investments are set to grow to £1.3 trillion by 2014, we want to make sure a big proportion of that new investment is made here in Britain.”

As part of realizing his ambitions, Cameron announced a new “Islamic Index” on the London Stock Exchange and revealed plans for Britain to release an Islamic bond.

“This means the creation of a new way of identifying Islamic finance opportunities — a world-leading Islamic Market Index,” he said.

The index will identify companies that meet traditional Islamic investment principles.

A foundation of Islamic investment is that it should be structured on the exchange of ownership or real assets, with money being used only as a method of payment.

Islamic financial principles also prohibit the payment of interest, so Islamic bonds pay investors a fixed return based on the profit generated by an underlying asset.

“It is another global first for the City of London,” said Cameron.

Afghanistan’s President Hamid Karzai said the comments from the British prime minister marked a “very welcome step,” and added he hoped Islamic finance could play a role of “reinforcing ethical and moral values” in the financial world after the economic crisis.

Pakistan’s Prime Minister Nawaz Sharif also welcomed the news that Islamic finance was “no longer confined to the Muslim world.”

Islamic finance has already helped to transform London’s skyline, with Qatari money part-funding the Olympic village used at last year’s games and the 310-meter Shard building now towering over the River Thames.

Editing by Sudarto Murtaufiq