Mayor of London, Boris Johnson, is making endeavours to lure Islamic financial companies to increase their market in London, reports Financial Times.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
The Islamic finance market is expected to expand to US$1.6 trillion in assets over the next three years in London, which is why the city is pushing for an increased share of the global Islamic finance market.
Boris Johnson met Malaysian Prime Minister Najib Razak in London on 3 July to discuss the immense opportunities the city offers to strengthen its position in Islamic finance.
London is scheduled to host the 9th World Islamic Economic Forum in October 2013, making it the first non-Muslim country to host this event. Malaysia had hosted World Islamic Economic Forum in 2012 and deals worth about £5.8 billion were struck at the event.
Malaysia views the upcoming World Islamic Economic Forum in London will offer more opportunities for discussions between both sides on business collaborations which would lead to quite a number of active business proposals.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataThe UK government has launched an Islamic finance task force in March, led by Treasury minister Greg Clark and Baroness Sayeeda Warsi, a Foreign Office minister as an investment drive.
According to the government of Malaysia, Malaysian investment in UK has been on the upswing with companies, including government-linked firms, looking at investing in real estate and purchasing buildings in London.
Islamic finance conforms to the principles of the Koran, and has designed new products, which enables people to use financial products, with no compromise on religious believes. Since Islam forbids people for the use of interest, the Islamic finance has made complex alternative such as sukuk, or bonds, and takaful, or insurance.
TheCityUK has stated that the sharia-compliant assets have witnessed a growth rate of almost 50% in two years, from $826 billion in 2010 to $1.2 trillion in 2012, and the figures are expected to further rise to $1.6 trillion by 2015.
London, since early 2000s has made several changes in regulations and policy to ease the use of sharia-compliant products. Roger Gifford, Lord Mayor of London, said: "We spent a lot of time fitting Islamic finance into other forms of regulation."
Financial Times stated that some 25 city law firms offer Islamic finance expertise and the country has three licensed Islamic banks, and 22 traditional banks that offer Islamic banking services. The key players in this sector are HSBC, Royal Bank of Scotland and Barclays as well as the London arm of Citigroup.
A quite a reasonable number of high-profile deals have involved sharia-compliant products, such as a £150m Qatari investment in the Shard building, as well as the Gulf state’s financial backing for the Chelsea Barracks redevelopment. In 2007, Kuwaiti investors have used sharia-compliant finance to buy out luxury carmaker Aston Martin.
The Islamic Finance was also hit by the global meltdown of the economy, and its recovery was hit by the uncertainty caused by the Arab Spring. The retail side of the Islamic Finance is retreating, with HSBC closing Islamic retail banking operations in six markets in October 2012; while the corporate finance business is witnessing continued growth.
Farmida Bi, European head of Islamic finance for law firm Norton Rose Fulbright, said: "In the past, the majority of finance in the Gulf was conventional finance. That’s really changed in the last three to four years. Lots of financing in the region is moving to being wholly sharia-compliant."
