UK government to support Islamic banking

31 January 2007

The Islamic banking sector in the UK is to be boosted by new measures.

Economic Secretary Ed Balls told the Euromoney Annual Islamic Finance summit that the government would take a role in establishing the UK as leading global centre for Islamic finance.

Measures announced included new legislation to facilitate the UK issuance and trading of Sukuk and guidance on diminishing Musharka and Takaful.

Mr Balls said: "As Islamic finance grows in importance, we want to see more of this business coming to the UK. There are currently in the region of £250 billion of funds within the Islamic finance system, growing at around 15 per cent annually.

"And there are encouraging signs that London is playing a growing role in these fast growing markets."

He pointed out that since 2003, the Islamic mortgage market in the UK has grown to over $970 million highlighted the fact that when Dubai Ports wanted to issue what was at the time the largest Sukuk ever completed, Barclays Capital provided expertise.

"We are currently looking at the how the tax system interacts with the Sukuk market - what barriers there are to establishing a secondary market in the UK; what barriers in the way of UK issuance and how UK holders are taxed," Mr Balls added.

"I can announce today our intention to set out in the Budget what a tax framework for sukuk will look like and what the consequences would be for any London market."

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