This is a guest post by Persephone.
Islamic finance (based on Sharia Law) is reinforcing London as a financial centre and supporting Britain’s property and financial sectors. Two of the largest property deals in Britain have been funded on the basis of Islamic finance:
1) The Â£1 billion Chelsea Barracks development is the most expensive property deal in Britain. Sold by the MoD to the Candy brothers and the Qatari government who plan to develop it into a housing estate of 638 market rate and affordable homes.
2) The Shard, a new landmark 310m tower above London Bridge Station will go ahead despite the withdrawal of lenders, such as Credit Suisse, during the credit crunch. It was saved by the financial backing of four Qatari banks and UK developers Sellar. The Tower is to become the home of Transport for London.
(The world of football may also benefit since Qatar is bidding to stage the 2022 World Cup.)
The principles of Islamic finance show Sharia to have an ethical side:
- Fairness: all make informed decisions, are not misled.
- Social justice: economic health of the majority – not wealth in the hands of the few.
- No usury or interest.
- Risk and profit is shared: profit distribution is based on effort not capital ownership.
- Contractual certainty and avoidance of ambiguity.
The advent of sharia law in the UK is wrongly perceived as being in the last 5-10 years and thereby linked as a by product of mass immigration brought about in the tenure of a Labour Government. In fact it has been used on commercial deals since the 80′s – at the height of the Conservatives.
In a recession, British businesses are seeking such fresh overseas markets, with more offices being opened in the Middle East. Consequently (outside of the Muslim world) London is the global capital for Islamic Finance and attracts Islamic banks and middle east investment because of its flexibility and willingness to innovate. English law is also the preferred jurisdiction for these deals and UK based lawyers, accountants and other experts are used.
The irony is that financial sharia products are developed in the UK and taken to the Middle East. The UK is also the financial centre of choice for listing Sharia Bonds called ‘Sukuk’ and has established the world’s first secondary market for Sukuk. According to the Financial Times, trade volumes in London ‘rose from a trickle in December 2006 to about $2bn in January 2007.
In 2007 the Islamic Bank of Britain (first UK retail bank) had over 50,000 accounts and approx. 42,000 customers. The size of the Islamic mortgage market in the UK is estimated at Â£500m. In addition, these banks bring employment and demand for property since their head office and management must be in the UK.
Don’t like globalisation or multi-culturalism? Then you are denying Britain its long heritage of seizing overseas opportunities. And that’s very un British.
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Filed in: Economics,Muslim