Scotland is emerging as new hub of Islamic finance

LONDON, the financial center of the world, may be stealing the limelight as far as promoting and developing Islamic finance in the UK and beyond, but another part of the UK, Scotland, is emerging as a new if complementary hub of Islamic finance out of and into the UK.

The Glasgow-based Islamic Finance Council UK (IFC), a non-profit organization established to promote Islamic finance in Scotland and the UK, is now emerging as perhaps the most proactive entity in the country. Recently, the IFC held a roundtable on Islamic finance at the Scottish Parliament in Edinburgh hosted by MSP (Member of the Scottish Parliament) Frank McAveety. The aim of the discussion was how to promote Islamic finance in north of the border. A presentation from Bank of London and the Middle East (BLME) highlighted opportunities for Islamic finance in Scottish infrastructure projects; while McClure Naismith, a commercial law firm, discussed possible involvement of Islamic finance in financing SMEs (small and medium term enterprises) in Scotland.

According to Tariq Masood, chairman of the IFC council, “It is clear that political will is a clearly a key determinant for success in this market. The IFC would urge the Scottish government to be more proactive in addressing the economic development opportunities Islamic ethical finance presents, particularly in these challenging and difficult times of recession.” The IFC has also proposed to the Scottish government of First Premier Alex Salmon, to establish an Islamic Finance House in Scotland to act as a conduit to assist Scottish firms (both in the financial services sector and other sectors) to tap into Islamic finance related opportunities.

The IFC has also discussed with Scottish Housing Minister Alex Neill the advantages the introduction of Islamic mortgages and housing financing schemes such as diminishing musharaka and ijara mortgages could have for Scottish home buyers. According to IFC board member, Omar Shaikh, who met with Neill and is an associate of Ernst & Young, the international auditors and consultancy, “Shariah-compliant mortgages could be a very attractive product in the current climate for all people of faiths and none. The ability to avoid negative equity is a very powerful message that would resonate for many in the middle classes who can’t afford to be stuck in such an awkward situation.” The IFC has also assumed a role of providing continuous education programs (CPDs) in Islamic finance. In May 2009, for instance, it organized the Second CPD Program for UK-based Shariah scholars which was held at the Ernst & Young offices in London and aimed at educating Shariah scholars about the credit crunch and financial crisis, capital market and the Treasury function in financial institutions. In July 2009 it held another CPD course in association with the International Shariah Research Academy (ISRA), an entity of Bank Negara Malaysia, the central bank, during the visit of the lord mayor of London, Alderman Ian Luder, to Malaysia.

At the London sukuk summit in July 2009, Sarah McCarthy-Fry, exchequer secretary to the UK Treasury and the minister leading the Islamic finance industry policy at the Treasury, reiterated that the UK government remains committed to Islamic finance and will continue to work with the other authorities and with industry to establish and maintain the UK as a global gateway to Islamic finance.

“In these difficult times for international financial markets,” she added, “new opportunities for growth and development become increasingly important. The Islamic finance market presents huge long-term opportunities for London and for the UK....Islamic finance is an opportunity that we want to see realized for the benefit of Britain as a whole — strengthening London’s position as — not just one of the world’s leading financial centers — but as the world center.”

Perhaps equally important is the reassurance from the exchequer secretary that the decision not to issue a sovereign sukuk by the UK Treasury at this time, “in no way reflects a diminished government commitment to Islamic finance in the UK.

I hope that other progress, including the measures announced in the recent finance bill (2009), will pave the way for the Islamic finance industry to grow, and that corporate sukuk products will thrive as alternative source of funding for UK and overseas firms.”

Link: http://www.arabnews.com/?page=6&section=0&article=125319&d=10&m=8&y=2009