U.K. Islamic Bond Back on Agenda as London Seeks Shariah Market

The U.K. government is considering reviving plans to sell Islamic bonds as part of an initiative to boost Britain’s role as a center for Shariah-compliant financing.

Treasury Minister Greg Clark and Sayeeda Warsi, a minister in the foreign office, are leading a working group to raise the profile of the Islamic finance industry, the Treasury said in an e-mailed statement today. Among items discussed at today’s inaugural meeting was the sale of Islamic bonds, said Shabir Randeree, chairman of DCD London & Mutual Plc in London and a member of the taskforce.

“What we will be looking at is whether a sovereign sukuk or an infrastructure type of instrument will be more appropriate,” Randeree said in a telephone interview from London.

The U.K. announced plans five years ago to become the first Western government to issue bonds compliant with Islamic law only to disband the initiative in 2011 when the Debt Management Office said the securities don’t “provide value for money.” The government is renewing its push as the global market for Islamic-compliant financing is set to double to $3 trillion by 2015, according to Standard & Poor’s.

The market for bonds that comply with Islam’s ban on interest is expanding as borrowing costs plunge. The average yield on sovereign sukuk tumbled 126 basis points, or 1.26 percentage points, last year to 2.65 percent, according to the HSBC/Nasdaq Dubai Sovereign US Dollar Sukuk Index. The yield was 2.83 percent March 7, the index showed.

To contact the reporter on this story: Maria Levitov in London at mlevitov@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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