http://aawsat.com/english/print.asp?artid=id12420
Islamic Banking a Western Success14/04/2008

Riyadh, Asharq Al-Awsat- When the British government stated that it was considering issuing a sovereign Islamic bond, or sukuk, it also issued a Treasury consultation document so that specialists and experts could consult and exchange views over this important step.
What caught my attention in this document was what was stated about the British government’s policy on Islamic finance, which seeks to consolidate London’s position as a global competitive financial center through facilitating procedures, especially those related to the Islamic banking industry, which is rapidly growing industry worldwide.

This is for two reasons:

One: To entrench London’s position as a global gateway for Islamic banking services

Two: To ensure that all British citizens have their preferred banking service available to them, irrespective of their religious affiliations.

Moreover, the document also highlighted the steps taken by the government with regards to this matter since 2003 until November 2007, which is when the document was issued. One example is that in 2003, the personal tax law was amended so that no one party would have to shoulder multiple tax payments, which in turn made it easier for banks to offer mortgages that were consistent with Islamic Shariah.

The British government continues to present one change after the other with the aim of facilitating the Islamic banking operation and creating a fair and competitive environment between Islamic banking and traditional banking, especially in matters related to taxes.

Indeed the government has taken a huge stride towards its goal of making London a global gateway for Islamic banking, which serves to illustrate the British government’s determination to pursue issuing a sovereign Islamic bond that is Shariah-compliant.

It is also a step that has not been taken by many Islamic states. The truth is a step such as this one is mutually beneficial to both parties involved in the process, meaning the British government and Islamic banking. Aside from carving niche for itself as the number one global gateway for Islamic banking, the British government will also reap a number of benefits the most important of which is making more liquidity available to the government at a lesser cost as a result of attracting huge cash surpluses from the Gulf states, which it cannot obtain from the global markets except through high-cost loans. This is an outcome of the worldwide credit crunch, which is a result of the US mortgage crisis, and which in turn has led to the scarcity of liquidity in credit markets globally.

Meanwhile, with this step, Islamic banking will gain international recognition and its identity, mechanisms and standards will become known on an international scale, which would put it on equal footing with other banking institutions.

A close examination of the steps taken by the British government towards becoming an international Islamic financial center reveals that it will be a challenging endeavor. It is common knowledge that Islamic banking is system that derives its provisions from the Quran and Sunnah (prophetic traditions) and is a binding economic system, which would thus make it difficult to implement in light of the state’s secular nature and the religious diversity of its nationals.

However, I am confident that it will, with little effort, succeed in integrating Islamic banking within its society in a manner that is harmonious with the life and faith of its citizens and in accordance with the appropriate laws whilst heeding its particularities and facilitating investment procedures.

* Lahem al Nasser is an Islamic banking adviser.

 

 

 

 

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