UK government 'warms to idea of sovereign sukuk'

KUALA LUMPUR // The UK's new Conservative-Liberal Democrat coalition government is set to revisit plans to issue the country's first sovereign Islamic bond, or sukuk, according to a banker advising British leaders on the issue. Humphrey Percy, the chief executive of the Kuwaiti-backed Bank of London and Middle East, said Mark Hoban, the new UK financial secretary to the treasury, was "prepared to look at it positively" after the Labour government rejected the sukuk idea.

"The previous government concluded that they did not want to do it because there were still uncertainties around the benefits to the government issuing sukuk," Mr Percy said on the sidelines of the World Islamic Economic Forum. "Things have changed." Mohammed Amin, the chairman of the business and economics committee of the Muslim Council of Britain and a member of the government's Islamic finance advisory team until late last year, said it appeared Mr Hoban was more willing than his predecessor to explore a sukuk issue as long as it made economic sense.

A sukuk is similar to a conventional bond, but typically is backed by assets and complies with Islamic law's prohibition on charging interest through leasing schemes and other structures. "I believe personally that the new Conservative government will actually assess this as a pure value-for-money question and if it can be demonstrated that issuing a government sukuk would be value for money, in other words compared with borrowing money conventionally issuing gilts, then I personally believe they would take a positive decision," he said.

A sukuk may be more expensive for the government to issue, he said, because of the complex nature of the underlying transactions. Yet there could also be more demand for a sukuk than a conventional bond given the global Muslim interest. Coupled with London's desire to cement its place as the centre for Islamic finance in Europe along with the UK's large debt load, political change could breathe new life into the government sukuk idea. Last year, Britain ran up a deficit of £159.2 billion (Dh841.94bn)

Mr Percy said he was hoping for the UK's first private-sector sukuk to be sold this year, pending a change in tax laws that would pave the way for corporate issues. Salem Ghandour, an Islamic finance analyst at one of Malaysia's largest banks, said the UK's exploration of a sukuk issuance showed a "clear willingness" on the part of governments in Europe to take part in the rise of the industry. "From a growth perspective, sukuk is very frontier, so increasingly countries are interested in issuing sukuks and having Islamic financial institutions to help them manage those sukuks," he said.

Also driving the government sukuk review are new regulations that will require UK banks to hold a greater amount of liquid assets in the form of highly rated government bonds starting in October, Mr Percy said. Sukuk issued by the Islamic Development Bank are the only securities that currently meet those criteria for the UK's five Islamic banks.


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New Zealand 176-8 (20 ovs)

England 155 (19.5 ovs)

New Zealand win by 21 runs

if you go

The flights

Direct flights from the UAE to the Nepalese capital, Kathmandu, are available with Air Arabia, ( Fly Dubai ( or Etihad ( from Dh1,200 return including taxes. The trek described here started from Jomson, but there are many other start and end point variations depending on how you tailor your trek. To get to Jomson from Kathmandu you must first fly to the lake-side resort town of Pokhara with either Buddha Air ( or Yeti Airlines ( Both charge around US$240 (Dh880) return. From Pokhara there are early morning flights to Jomson with Yeti Airlines or Simrik Airlines ( for around US$220 (Dh800) return. 

The trek

Restricted area permits (US$500 per person) are required for trekking in the Upper Mustang area. The challenging Meso Kanto pass between Tilcho Lake and Jomson should not be attempted by those without a lot of mountain experience and a good support team. An excellent trekking company with good knowledge of Upper Mustang, the Annaurpuna Circuit and Tilcho Lake area and who can help organise a version of the trek described here is the Nepal-UK run Snow Cat Travel ( Prices vary widely depending on accommodation types and the level of assistance required. 

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