Britain is “perfectly placed” to capitalise on the rapid growth of Islamic finance, a UK trade minister told a conference of industry experts in London.
Rona Fairhead, the former BBC Trust chair who was recently appointed to the Department of International Trade, said Britain is already leading the Western world in Islamic finance, with over 20 banks offering specific services in the sector — more than double the number in the US.
As the market continues to grow, London will remain the “pre-eminent location” to build out that expertise, Baroness Fairhead told the Islamic Insurance Association of London’s annual conference.
“There is no better place outside of the Muslim world to access Islamic finance and insurance,” she said. “The level of our support, government and industry support, for this burgeoning sector exceeds the comparisons elsewhere.
“We have in place an incredibly strong foundation, boasting expertise, experience and innovation in Islamic finance.”
She added: “My message here today is that we in government are here to assist.”
The UK government’s eagerness to safeguard the sector’s growth is understandable at a time when London is fighting to retain its status as Europe’s financial capital.
A recent report by financial lobby group TheCityUK found that globally, the market for services in the Islamic finance sector increased by 7.5 per cent in 2015 to a record $2 trillion worldwide.
While that figure is impressive, it only makes up 1 per cent of global financial assets. At the same time, Muslims make up 25 per cent of the world's population. "It does not take a genius to conclude that this sector has extreme latent potential," Baroness Fairhead said. "Indeed, the sector is forecast to grow by almost 20 per cent next year."
As a result, there are “clear and significant opportunities for investment and further expansion”, she said.
There are now over 100,000 Islamic finance customers in the UK, she said. Britain hosted the World Islamic Economic Forum in 2013, making it the first non-Muslim country to do so. It was also the first Western nation to issue a sovereign sukuk. “Now the London Stock Exchange is the global hub of these bonds, with 65 issues to date totalling in excess of over $48 billion,” she added.
The UK financial regulator also recently authorised the first Sharia compliant fintech company — property investment firm Yielders. “And more are set to follow,” Baroness Fairhead said.
London also is one of the few global jurisdictions where Sharia-compliant firms and products are covered by a single, secular regulatory framework.
All of this, she said, explains why the UK is “perfectly placed to lead the growth in this sector”.
Baroness Fairhead praised the work of the Islamic Insurance Association of London since it was launched in 2015, saying it “illustrates that this city is leading rather than following: reinforcing the UK is the Western hub of Islamic finance through innovation and industry”.
She added: “Whilst London leads the way in Europe in the provision of Islamic financial services, we now have an opportunity to be at the vanguard of insurance provision too.”
On Brexit, the minister acknowledged the uncertain climate for businesses in the UK as they await the outcome of divorce talks with the European Union. But she assured the audience that the government is determined to secure barrier free access to the European single market, as well as a “time limited implementation period” to give businesses time to adapt after the official date of Brexit, in March 2019.
“I am confident that London will remain the premier financial centre of the world, with the financial services sector continuing to drive forward our economy,” she said.
“London is the most dynamic financial city in the word and for those in this room who are ready to take hold of this exciting growing market, I believe the rewards will be significant.”