UK's Shariah banking still lacks awareness, skills and standardisation

By Habhajan Singh
The Islamic finance fraternity in the United Kingdom, which has been experiencing growth in the last five years, has to deal with areas of standardisation, awareness and skills to take the industry forward, according to a recent document from the UK Treasury.
The document also noted that the government would provide "support and encouragement where appropriate".
According to a December 2008 Treasury report entitled "The Development of Islamic Finance in the UK: The Government's Perspective", the role of the government in achieving this progress has been important, particularly through the removal of tax and regulatory barriers.
"The Treasury and the Financial Services Authority will continue to work towards creating a level tax and regulatory playing field between conventional and Islamic finance.
"Furthermore, the government will continue to keep the feasibility of issuing sovereign wholesale and retail Islamic finance products under review," the report added.
UK is home to a number of Islamic banks, including the European Islamic Investment Bank, Islamic Bank of Britain and Gatehouse Bank.
Being an international financial hub London is also seeing Islamic finance related events, like the 8th Annual Islamic Finance Summit which begins tomorrow in the city. The two-day seminar will look at at the possibility of providing European corporate institutions with Islamic liquidity and whether Islamic liquidity for European corporate institutions as the possible "next big driver" is merely wishful thinking.
In its document, the UK Treasury noted that "it is clear that much of the future work in developing the sector and removing barriers for growth in areas such as standardisation, awareness and skills, is necessary to take the industry forward, with the government providing support and encouragement where appropriate".
The document, containing a foreword from economic secretary to the Treasury Ian Pearson, also highlighted several areas that the government has identified for further progress.
These include collaboration between industry and international standard setting bodies to create a set of robust and accessible term-sheets for the main Islamic products. Another area is the collaboration among industry and community groups to raise awareness and knowledge about Islamic finance at the grass roots level.
The third area has been identified as collaboration between industry and trade bodies to highlight the UK's strength as a provider of education, training and skills in Islamic finance.
"Many of the remaining barriers will be addressed as the sector grows and develops. However, where there is a need for further intervention, the government stands ready to help," the document said.
The report also noted that the UK is now the leading centre for Islamic finance outside of the Gulf Cooperative Council and Malaysia.
"London and Birmingham now host the only stand-alone Islamic financial institutions in the EU. "UK consumers can now access a wide range of Shariah compliant retail financial products and services, which are regulated to the same standard as conventional financial products, conferring the same degree of consumer protection," it said.
On its regulatory approach, the document repeated what it had stated earlier that the government "will not champion Islamic finance over conventional finance, but will instead strive to create a level playing field between Islamic and conventional finance".

(This story appeared in The Malaysian Reserve on Feb 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)