The UK's first Islamic Finance Task Force will be led by Greg Clark, Financial Secretary to the Treasury, and Foreign Office minister Baroness Warsi. The co-chairs will be supported by experts from the banking industry and UK Islamic Finance Secretariat.
"We expect the global market for Islamic financial services to experience significant growth over the coming years, but feedback from decision-makers in the Middle East and South East Asia suggests there is a lack of awareness of the UK industry and that we should be doing more to promote the sector," Baroness Warsi said. "There are also major opportunities to attract investment into the UK as demand for Islamic finance increases from private investors and sovereign wealth funds."
Islamic finance expert Amir Ahmad of Pinsent Masons, the law firm behind Out-Law.com, said that the announcement highlighted the "growing importance" of Islamic finance to major financial centres.
"The City of London has developed itself as the world financial capital," he said. "Islamic finance has grown significantly in the last two decades and, irrespective of its critics, is now a core part of the international financial markets. The UK Treasury's recent moves highlight the growing importance of Islamic finance and London's desire to ensure that capital continues to flow through the City."
Among the initial objectives for the task force will be to represent the UK at the World Islamic Economic Forum (WIEF), which is due to take place in London at the end of October. The annual business event, which this year will take place outside of a non-Islamic or Asian city for the first time, will host 1,500 business experts from the Islamic world, according to the Treasury. The task force will also help shape the WIEF's themes and content, provide a forum for industry comment and promote both the event itself and the significance of London hosting.
Islamic, or Shari'a, finance refers to financial products which adhere to the principles of Islamic law. Transactions are often structured in a very different way to conventional western financial products in order to comply with Shari'a principles, such as the ban on allowing one party to make money unjustly at another's expense. Wealth can only be generated through trade and investment in assets, providing that those assets are not banned by Shari'a. Interest, known as 'riba', is also banned.
The Treasury said that although the UK was the "leading non-Islamic hub" for Islamic finance, the industry had not yet "reached its full potential". According to Reuters more than $34 billion worth of 'sukuk', or Islamic bonds, have been issued through the London Stock Exchange, but the UK's financial capital is facing increasing competition from cities where Islamic funds originate.
The task force would raise the profile of the UK Islamic finance industry and encourage inward investment into the UK economy from Shari'a compliant funds, the Treasury said. It listed the potential for investment in infrastructure and the provision of credit for business start-ups and SMEs as examples. It will also provide wider opportunities for industry comment, research and insight; and act as a liaison between the Government, financial and related professional services industries, according to the Treasury.
Financial Secretary to the Treasury Greg Clark said that the task force was part of the Government's drive to "make sure that Britain is open for business".
"The Islamic Finance Task Force is a perfect example of our ambition to promote London as a leading financial centre and attract inward investment for the wider economy," he said. "The Task Force has an important role to play. Our focus now is to ensure that the UK and London is well placed to showcase what we have to offer at the World Islamic Economic Forum in October."