Darling To Back Sharia Money Bonds

Updated:10:50, Sunday February 17, 2008
Britain could become the first Western country to issue so-called Islamic bonds in line with Sharia law which scorns interest payments on loans.

In next month's Budget, the Chancellor Alistair Darling is expected to back the bonds, which would attract money from the Middle East.
The Treasury announced last April that it was interested in exploring the possibility of borrowing funds via such Islamic law-compliant bonds, known as sukuk.

A consultation exercise on the issue, launched in November, ends on Thursday.
A Treasury spokesman said that the feasibility study has been looking at whether or not the bonds would be practical and MPs are expected to be updated on progress in the Budget.

Islamic law forbids making money from interest, making conventional loans unacceptable to the devout.
But specially-designed bonds have been designed to comply with the demands of Sharia, and sukuk is now estimated to be worth £5.5bn in a £125bn global Islamic financial market.

Most Islamic financial products work on the principle of investing in a fixed asset which generates a rate of return, such as rental income on property or an asset repays a larger capital sum on redemption.

A Treasury spokesman said: "We want the City of London to be one of the gateways globally for Islamic financial products and we want it to be competitive on all products you can imagine, so we should be competitive on Islamic finance as well as any other.
"Just because of your faith, there shouldn't be any issue about your access to financial services in the UK."
But Edward Leigh, chairman of the House of Commons Public Accounts Committee, told the Mail on Sunday: "I am concerned about the signal this would send - it could be the thin end of the wedge.
"British Common Law must be supreme and should apply to everyone," he added.