In a speech last week (full text), Britain's Economic Secretary to the Treasury, Ed Balls, announced that the UK government is looking into the possibility of issuing government bonds that are Sharia compliant. He said that a working group is being formed to "examine the wider benefits from the issuance of sukuk bonds for the development of London as a centre for Islamic finance." Bahrain, Malaysia, Qatar and Saxony-Anhalt in Germany are already issuing this type of financial instrument. In addition to considering the issuance of Sharia-compliant bonds in the wholesale sterling market, Britain's National Savings and Investment agency will examine the possibility of issuing Islamic products in the retail market as a way of encouraging British Muslims to save.
Last week, stories in The Guardian and Arabian Business emphasized the growing market for Islamic financial products. The government bond proposals are part of a broader group of measures that were announced by Secretary Balls on April 16 at a government-hosted summit on Islamic finance. (Press release.)
Britain's initiative is not without its critics. In a letter to the Financial Times last week, a spokesperson for the Lawyer's Christian Fellowship argued that Sharia would limit the purposes for which funds raised from the bonds could be spent, and that disputes regarding such financial instruments could involve the need to interpret religious law. In this regard, an article today in LiveMint.com profiles Bahrain's Sheikh Nizam Yaquby, one of a group of Islamic scholars who advises financial companies around the world on structuring insurance policies, accounts and bonds to meet the requirements of Islamic law.
UPDATE: The May 3 Legal Times carries an interesting article on the growing demand for lawyers with expertise in Islamic finance and the role of Islamic scholars in developing new products.
