June 23 Luxembourg hopes to adopt a bill before the summer holidays that would allow it to issue its first Islamic bond, with the AAA-rated sovereign opening the door to future sukuk issuance, a filing with the legislature said.
The government requested the legislature's advisory body, the Council of State, to consider a revised bill on July 1st, so it can securitise government assets to back a sukuk worth 200 million euros ($275 million).
The time frame could see Luxembourg lose out to Britain in issuing the first sukuk from a Western nation, but repeat sukuk issuance could cement a stronger commitment to the Islamic finance industry.
Britain has mandated banks to arrange a 200 million pound ($336 million) sukuk in coming days, although officials have previously said this would be a one-off transaction rather than the start of a regular issuance programme.
Both countries are keen to boost their industry credentials to attract more business from cash-rich Gulf countries and tap into the growing market for sukuk.
Luxembourg has sought to build a broader role in the industry: Its central bank remains the only European member of the Malaysia-based Islamic Financial Services Board, one of the industry's main standard-setting bodies, joining in 2009.
It is also the only western country to be a shareholder of the International Islamic Liquidity Management Corp, a body which the central bank helped setup in 2010, with its $1.35 billion sukuk programme domiciled in Luxembourg.
Britain's plan to issue sukuk are likely to strengthen its position as a centre for sukuk business, although the government drew some criticism for not including any of its six full-fledged Islamic banks in the mandate. (Editing by Kim Coghill)