LONDON - British Prime Minister David Cameron has announced that the UK will become the first non-Muslim country to issue an Islamic bond.
Addressing the World Islamic Economic Forum (WIEF) in London, he also announced plans for a new Islamic index on the London Stock Exchange. It is intended to attract more Islamic investors by making it clearer which companies match their criteria.
Cameron also unveiled plans to encourage investment in the UK by Muslim countries, saying he wants to make London “one of the greatest centres for Islamic finance anywhere in the world”.
Cameron said London aims to become a top capital of Islamic finance as the city played host to the first World Islamic Forum outside the Muslim world.
"Already London is the biggest centre for Islamic finance outside the Islamic world. And today our ambition is to go further still," Cameron told more than 1,800 political and business leaders at the ninth forum, dubbed the "Davos of the Muslim world".
"I don't just want London to be a great capital of Islamic finance in the Western world, I want London to stand alongside Dubai and Kuala Lumpur as one of the great capitals of Islamic Finance anywhere in the world," he said.
"Investing in London is good for you and opening London up to your investment is good for us."
More than 20 UK banks currently offer Islamic financial products, while 49 Islamic bonds - called sukuks - with a total value of $34 billion, have been listed over the last five years on the London Stock Exchange.
But Cameron aims to expand well beyond this. "When Islamic finance is growing 50 per cent faster than traditional banking and when global Islamic investments are set to grow to £1.3 trillion by 2014, we want to make sure a big proportion of that new investment is made here in Britain."
As part of realising his ambitions, Cameron announced a new ‘Islamic Index’ on the London Stock Exchange and revealed plans for Britain to release an Islamic bond.
"This means the creation of a new way of identifying Islamic finance opportunities - a world-leading Islamic Market Index," he explained.
The index will identify companies that meet traditional Islamic investment principles.
A foundation of Islamic investment is that it should be structured on the exchange of ownership or real assets, with money being used only as a method of payment.
Islamic financial principles also prohibit the payment of interest, so Islamic bonds pay investors a fixed return based on the profit generated by an underlying asset.
"It is another global first for the City of London," said Cameron.
Afghanistan's President Hamid Karzai said the comments from the British prime minister marked a "very welcome step", and added he hoped Islamic finance could play a role of "reinforcing ethical and moral values" in the financial world after the economic crisis.
Pakistan's Prime Minister Nawaz Sharif also welcomed the news that Islamic finance was "no longer confined to the Muslim world". Islamic finance has already helped to transform London's skyline, with Qatari money part-funding the Olympic village used at last year's games and the 310-metre Shard building now towering over the River Thames.
Addressing the forum, Nawaz proposed a five-point strategy to realise the true socio-economic potential of the Islamic world that constitutes 23 per cent of the world population.
Elaborating on his five points‚ Sharif said apart from responsible exploitation of the physical resources‚ “we also need to focus on human resource development and scientific advancement”.
He regretted that today only one per cent of the scientific research articles were produced in the Muslim countries as against 90 per cent published by Muslim scientists in the Middle Ages.
The prime minister called for quick movement from mere consumption to increased production of economic goods and services. “We must transform our natural resource and labour based economy to private sector led and value added economy,” he said.
The premier said “there was need to adopt an inclusive and collaborative growth models for benefit of our people”. H also proposed focus on transparent and merit-based governance with greater emphasis on performance and service delivery.
Prime Minister Sharif said Islamic system of finance might provide answer to multi-faceted problems of interest-based financial system. He pointed out that assets of banks and financial institutions practicing Islamic finances had reached impressive figure of $1.3 trillion. Three hundred and seventy-five banks and financial institutions are practicing dedicated Islamic finance while 110 conventional banks and financial institutions offer Islamic finance windows. Globally listed and Islamic Sukook market has expanded rapidly in the last seven years to reach 500 billion dollar mark. These are very encouraging signs as Islamic finance explores new markets and is no longer confined to Muslim countries.
Prime Minister Sharif further said problems and challenges of the Muslim world and the rest of the world offered a scope for cooperation in the sectors such as energy‚ water‚ infrastructure‚ trade and investment.
The premier also referred to movement towards knowledge-based economy‚ revolution in information and communication‚ and unprecedented movement of goods and services and flow of capital in the past two decades.
He said these developments had positive impact on the world as the global wealth had more than doubled since 2000 reaching to $241 trillion, but many economies had lagged behind and absolute number of poor in these countries had actually increased. He said Islamic nations had much to offer to the world both in economic contribution as well as social and political philosophies.
Sharif also said that Muslim countries had a combined GDP of $6.6 trillion which was only eight per cent of the world GDP. “Our countries are spread over a land mass constituting one third of world and possess vast amount of natural resource. We connect East with the West yet our exports are only 14 per cent of the global exports. Average GDP Per Capita Income in 57 Islamic countries is $4900 which is less than half of the global average of $10400.”
The prime minister emphasised the need for making sustained efforts by the Islamic countries for rapid socio-economic development of and contribution towards growth of the world economy.
“There is a need to identify factors which are inhibiting growth in Islamic countries and learn from experiences of those who spearheaded journey of development,” concluded the premier.