Ever since I first learnt about the unique and fascinating world of Islamic finance, more than 30 years ago, I’ve spent my working life exploring its intricacies and promoting its principles to my fellow financiers in the UK.
What is perhaps surprising, given that this is a field which traces its origins back thousands of years, is that Islamic finance is full of innovation. It feels fresh and different. And what’s more, it’s now more international than ever, with London, in particular, emerging as its undisputed Western hub.
The UK government became the first country outside the Islamic world to issue sovereign sukuk, a bond structured to generate returns to investors without infringing Sharia law, which prohibits taking or charging interest. Last month, the UK’s Al Rayan Bank became the first bank in the world to issue a public sukuk in a non-Muslim country. The list of firsts goes on and on.
But as we look to secure our economic future in the post-Brexit era, there remain huge opportunities for us to embrace Islamic finance. As remarked by communities secretary Sajid Javid, himself a key driver of the sector in the UK: “With over 1.6 billion Muslims worldwide, Islamic finance is a massive global industry with huge economic potential to expand.”
Mr Javid spoke recently at a global meeting on Islamic finance held in the City of London. The Sukuk Summit 2018, hosted by the Islamic Development Bank (IsDB), which represents 57 Islamic member states, brought together investors and experts from around the world to discuss the future of the sector.
That the IsDB chose the London Stock Exchange as its venue is a hugely positive sign. The fact that the government then invited delegates to a reception at 11 Downing Street is another good sign, this time of the importance being placed on this burgeoning sector.
Islamic finance is a hot topic across the political divide. The summit was formally opened by Sadiq Khan, mayor of London, who described Islamic finance as “an area which is driving positive and ethical change around the world”.
The mayor’s comments rang true for me. What’s more, they were a reminder of what it was that fascinated me so, all those years ago.
There is something much more real and tangible about authentic Islamic finance. Indeed, in a world still recovering from the 2008 global financial crisis, the practices of Islamic finance provide a template for how finance could better become a force for good.
Fundamental principles, such as the sharing of risk, linking finance to the purchase and sale of physical assets, and the avoidance of excessive speculation, all seem prudent lessons given the mistakes of the past.
So here is the challenge for London. As we look beyond Europe to new and developing markets, we must build an Islamic finance sector that is both pioneering and successful, but also fair and productive.
