The British government is working on a consultation paper which examines the possibility of a sovereign Sukuk, which has been the subject of quite some speculation for well over a year.
The document sets out the proposed legislative framework for the regulatory treatment of what it describes as 'Alternative Finance Investment Bonds' or AFIBs. AFIBs, according to a press release on the HM Treasury website, refer to a type of financial instrument commonly known as Sukuk or Islamic bond, but can also refer to any financial instrument with similar characteristics.
The new consultation paper considers the regulatory policy options for Sukuk and is a joint consultation between HM Treasury and the Financial Services Authority (FSA). Sukuk, says Treasury and FSA, are one of the most prominent instruments used in Islamic finance. Since 2003, there have been several initiatives by the UK authorities (meaning the FSA and Treasury) to create what it frequently calls a 'level playing field' for Islamic finance. For example, the government has introduced, and has proposals to further introduce, various tax changes with respect to AFIBs, although it doesn't specify in the press release what they are.
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