Britain plans to issue Shariah law-compliant bonds

The Associated Press

LONDON: Britain's Treasury is likely to back plans to issue Shariah law-compliant bonds, officials said Sunday — amid continuing debate about the application of Islamic laws in the U.K.

Treasury chief Alistair Darling, who will present his annual budget on March 12, plans to issue the Islamic bonds, known as sukuk, to tap into a fast-growing market in the products.

"We want the City of London to be one of the gateways globally for Islamic financial products," a Treasury spokesman said, on customary condition of anonymity in line with policy.

"Just because of your faith, there shouldn't be any issue about your access to financial services in the U.K.," he said.

Shariah law prohibits charging or paying interest, which has led to the growth of a market in financial services created to be compliant with Islam.

Sukuk are structured as profit-sharing plans so that the bondholder's income resembles a rent payment. The process is usually blessed by a board of religious scholars affiliated with a bank.

Islamic banking assets totaled US$750 billion in 2006, according to a report issued in October by consultants McKinsey & Co.

Sukuk issuance has grown almost 85 percent per year since 2001, the McKinsey report said.

Darling's move follows worries over comments made by Archbishop of Canterbury Rowan Williams, who has called for a limited application of Islamic Sharia law in Britain.

Williams, the country's highest ranking Christian leader, suggested British Muslims should be able to resolve marital and financial disputes under Islamic law rather than in British courts.

His comments were rejected by Prime Minister Gordon Brown and led to sharp criticism from other clerics and lawmakers.

Opposition Conservative legislator Edward Leigh said he feared issuing Shariah-compliant financial products could also cause problems.

"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," Leigh was quoted as telling the Mail on Sunday newspaper.