In recent years, the UK has stepped up its game in Islamic finance. In 2014, for example, it became the first country outside the Islamic world to issue a sovereign sukuk, the Islamic equivalent of a bond.
With such significant developments taking place here in the UK, I was very much looking forward to a trip to Turkey where I discussed how we can build upon this further.
A major focus of my trip was the Islamic Finance Summit, hosted at the British Consulate-General in Istanbul. Playing host to more than 100 Turkish, British and other international bankers, business people and academics, it was a good opportunity to see close up how the rise in prominence of Sharia-compliant finance in the UK had helped strengthen bonds with Turkey.
Built upon Islamic law, Sharia-compliant investment firms are prohibited from investing in businesses that trade, for example, in the sale of alcohol, pork products and gambling. The other significant difference lies in the way in which interest is paid and owed. Instead of charging or receiving interest, a bank and its customer will share the risk of an investment on agreed terms, dividing any profits between them. The collection and payment of interest by lenders and investors is not permitted under Islamic law.
It wasn’t until the turn of the century that the UK started its first Islamic finance working group. Since then, however, City firms have grown exponentially to meet demand – business in Sharia-compliant finance is stronger now than ever before, demonstrating yet again the flexibility and ability to innovate that is inherent in the City’s DNA.
London now has more than 20 international banks operating in Islamic finance – five of which are fully Sharia-compliant. Further to this, more than 20 law firms – with offices in the UK – are supplying legal services relating to Islamic finance for global and domestic markets.
Islamic finance mechanisms have been used in a number of projects in London itself, such as The Shard, the Olympic Village, and the redevelopment of the Chelsea Barracks and the Battersea Power Station sites.
Read more: Islamic finance market tops £1.3trn
The UK is also the global leader in Islamic finance education with over 70 business courses in the UK having an Islamic finance element and more than 20 universities offering degree programmes specialising in the subject. As an educator I firmly believe that these courses will foster the next generation of finance professionals who will cement London’s position as the western hub for Islamic finance.
As we start the process of leaving the EU, it is now more important than ever that we deepen our business relationships across the world with valued partners such as Turkey. The United Kingdom has always been a global trading nation, epitomised most strongly by the City of London, the world’s leading financial centre. Turkey too for centuries has been a hub of global trade, with East and West meeting in Istanbul. I believe we can both play to each other’s strengths.