| June 13
June 13 The British government has mandated
banks to arrange a five-year 200 million pound ($336 million)
sukuk - the world's first Islamic bond to be issued by a Western
The bond could be issued in the coming weeks, subject to
market conditions, The Treasury said in a statement late on
Thursday. This would place the issuance ahead of the Muslim holy
month of Ramadan which starts at the end of June.
A sovereign sukuk is the centrepiece of Prime Minister David
Cameron's bid to position London as a leading hub for Islamic
finance, as competition heats up with financial centres in the
Middle East and Asia.
The bond would be issued before similar transactions planned
by Luxembourg, Hong Kong and South Africa, all keen to diversify
their funding sources and tap liquidity provided by increasingly
wealthy Islamic investors.
In January, Britain appointed HSBC to arrange the
deal and it has now added four more banks to the syndicate:
Qatar's Barwa Bank, Malaysia's CIMB, National Bank of
Abu Dhabi and Standard Chartered.
The sukuk will use an ijara structure, a sharia-compliant
sale and lease-back contract, allowing the rental income of
three central government offices to underpin the transaction.
In an ijara sukuk, a party leases equipment, buildings or
other facilities to a client for an agreed rental price - a
popular format among both sovereign and corporate issuers.
Britain has six full-fledged Islamic banks and over 20
institutions in the country that offer sharia-compliant
financial services, which follow religious principles such as a
ban on interest and gambling.
A sovereign sukuk could help Britain's Islamic banks to help
manage their short-term liquidity needs.
In March, The Bank of England said it was studying ways to
increase the number of sharia-compliant assets that Islamic
banks can use in their liquidity buffers, a step towards
reducing concentration risks in the sector.
Britain considered a sovereign sukuk six years ago, but that
issuance never materialised as the Debt Management Office
decided the structure was too expensive at the time.
($1 = 0.5956 British pounds)
(Editing by Eric Meijer)