Industry body calls for UK to take ambitious approach to Islamic finance

The UK must take action to secure its position as the leading western hub for Islamic finance, according to a new report by TheCityUK.

The financial services body called for the UK to take a more ambitious, coordinated and strategic approach to Islamic finance, which it says has a significant in driving investment, supporting infrastructure delivery and strengthening the UK’s position as a leading international financial centre.

Islamic finance has sustained annual growth of 10-12% in recent years, with associated assets projected to reach $7.5trn by 2028 and Muslim wealth estimated at $27.8trn globally, TheCityUK said in its report, Islamic finance and UK economic prosperity: A vision for growth.

The industry body has issued a series of recommendations for how government can support industry in pursuing new Islamic finance product development and growth, including:

• Working with industry to develop a pipeline of Shariah-compliant investment opportunities across real estate, infrastructure and other growth sectors aligned to the industrial strategy.
• A dedicated investment portal and stronger international promotion would make it easier for Islamic investors to identify UK opportunities.
• Using sovereign Sukuk more consistently as a strategic signal of its commitment to Islamic finance, helping to build investor confidence internationally, support price discovery and crowd in Shariah-aligned capital.
• Exploring a digital sovereign Sukuk to position London at the forefront of innovation in Islamic capital markets.
• Building greater Islamic finance expertise within the HM Treasury and financial regulators to deliver effective policies and regulations to drive growth in this high potential segment of the market.
• Making greater use of UK Export Finance’s Shariah-compliant toolkit to help de-risk projects internationally

The report also sets out recommendations for the UK to deepen international partnerships and undertake market-specific approaches to international engagement to fully capitalise on opportunities in key Muslim-majority markets.

Wider benefits to the action could include expanding exports of UK financial and related professional services in markets such as Malaysia, GCC and Indonesia, and strengthening financial inclusion in the UK, particularly for Muslim communities underserved by current savings and pension products, the report said.

Nicola Watkinson, managing director, international, TheCityUK, said: “The UK has a terrific tradition of servicing global Islamic financial markets but to capitalise on the significant and immediate global growth opportunity it presents there needs to be greater pace and ambition from the UK government and regulators.

“Global competition is increasing and the task now is to make sure the UK’s offer is clear, coordinated and compelling to sovereign wealth funds, global investors and Islamic finance market participants. This will require a whole-of-government approach and close coordination with industry to ensure the UK remains the leading western hub for Islamic finance.”