Last month, the Islamic Development Bank and London Stock Exchange hosted the Sukuk Summit, not long after Al Rayan Bank listed a £250m three year-dated Sukuk in the capital.
The issuance helps Al Rayan Bank to diversify its sources of funding, which in the past has been reliant on retail deposits. Ultimately, by lowering our funding costs I hope to be able to reduce the cost of finance to our customers.
Named after the fantasy writer J.R.R. Tolkien, ‘Tolkien Sukuk’ was significantly oversubscribed, with 97% of subscribers coming from the UK. This reflects the equal demand for Islamic financing instruments in comparison to conventional in the UK market and should serve as a catalyst for others looking to enter the market.
Al Rayan Bank was established in 2004 and, since then, we have pioneered in Sharia-compliant banking in the country.
During that time, we’ve also seen a number of very positive legislative changes from successive British Governments, designed to create a level playing field for Islamic banks. In June 2014, the UK became the first country outside the Islamic world to issue a sovereign Sukuk when the Government listed a £200 million Sukuk on the London Stock Exchange. Fast forward almost four years and more than $50bn has been raised through 67 Sukuk listings on London’s markets.
The UK is extremely well positioned to become the leading destination of Sukuk issuance for Western Europe and a launchpad for Islamic banking. English law provides an ideal framework and complements Islamic finance nicely, and the Government continues to be supportive of new entrants to the market that provide alternative and ethical ways of banking.
We’d like to see Tolkien Sukuk become a template for others to follow and we hope that it acts as a catalyst that encourages other Islamic banks to look at the residential mortgage-backed securities (RMBS) market as a potential funding structure for them as well.
With a supportive regulatory and legal framework, the only real obstacle to the growth of the sector in the UK is a lack of understanding. Although over a third of our customers are non-Muslim, many people are not familiar with Islamic banking principles that underpin our operations; while we found that many overseas Islamic institutions required clarity on the RMBS structure.
We accept our responsibility to promote awareness and understanding of Islamic finance and the opportunities it provides.
Al Rayan Bank plans to re-enter the Sukuk market at some point next year, by which point other Islamic banks may have chosen to join us, but in the meantime, we can expect the sector to continue to build its presence in the UK and London and make its compelling case to become a global Islamic finance hub to rival Dubai or Malaysia.
SIGN UP TO OUR NEWSLETTER TO RECEIVE MORE NEWS LIKE THIS STORY
U Account introduces cash pay-in option
U Account has launched a cash pay-in option for its 50,000 current account customers.
Aldermore provides £6.27m loan for south London development
Acre Invest has agreed a £6.27m funding package with Aldermore to build a large commercial unit and 18 apartments in Sydenham, south London.
Metro Bank to launch AI-powered money management service
Metro Bank has announced the upcoming release of Insights, a new artificial intelligence-powered money management service.
Over 500,000 complaints made about current accounts
The FCA has revealed that 509,047 complaints were made to financial services firms about current accounts during the second half of 2017.
A guide to ethical banking
Some 56% of workers with a pension are interested in investing in community projects, according to recent research.
Countingup partners with PrePay Solutions
PrePay Solutions (PPS) has joined forces with challenger bank Countingup to provide business accounting and banking together in one place.
TSB and Enterprise Nation offer SMEs digital MOT test
TSB’s small business customers have the opportunity to undertake a newly created digital MOT test as they join the Enterprise Nation community.
Revolut introduces spare change savings feature
Revolut has become the latest mobile banking platform to add a spare change savings feature to its current account.
GDPR compliance highlighted at first FIBA roadshow
The Financial Intermediary & Broker Association (FIBA) held its first regional roadshow last Thursday (12th April) in north London.
Moneyhub integrates with Monzo and Starling
Moneyhub has integrated with Monzo and Starling’s APIs to provide customers of the digital banks with a comprehensive overview of all their financial assets.