TheCityUK on Islamic Financial Services (November 2015)

The City UK has published its annual review of Islamic finance, after no publication last year. The November 2015 edition is titled ‘Leading Western Centre for Islamic Finance.’ Bearing in mind that this is promotional material and that the methodologies behind its estimates and predictions are not made explicit it remains an instructive snapshot of Islamic finance both globally and in the UK. If nothing else it reiterates and re-emphasises the government’s interest in jurisdictional competition, consolidating gains (against select EU countries in particular) and seeking to attract investment and global business by offering Islamic financial and ancillary professional services. A selection of facts from the publication follow:

Global perspective on Islamic finance and banking

  • Global market for Islamic financial services is US$2 t, an increase of 12% in 2014
    • The City UK ‘expects the market to top $3 trillion by 2018′
  • The demographic card: ‘the global Muslim population numbering some 6 billion accounts for over a fifth global population [emphasis as written], but Sharia compliant assets make up only around 1% of the world’s financial assets. Less than a fifth of Muslims worldwide currently use Islamic financial products.’ 
    • ‘The Muslim population is forecast to grow at about twice the rate of the non-Muslim population over the next two decades. If current trends continue, Muslims will make up 26.4% of the world’s total projected population of 8.3 billion in 2030, up from 23.4% of the estimated 2010 world population of 6.9 billion.’
  • Geographic expansion of Islamic financial institutions into new countries including Australia, Azerbaijan, Nigeria, Oman, Pakistan, Qatar and Russia.
  • ‘Overall growth is projected to maintain high rates, as the Islamic banking sector expands in major markets such as Saudi Arabia, Kuwait, Qatar, Malaysia and the United Arab Emirates (UAE).’
  • Banking accounts for nearly 80% of Islamic finance assets, sukuk 16%, funds 4% and takaful 1%.
    • Commercial banks account for the majority of assets.

UK perspective on Islamic finance and banking

  • 20 banks offering Islamic financial services in the UK
    • Double the number located in the US and more than any Continental European country
    • 5 fully shari’ah complaint banks in UK, placing it in the lead amongst western countries
  • UK Islamic banks’ assets totalled US$4.5 b (end 2014)
  • In excess of 100,000 retail customers
  • Examples of project and development finance compliant with Islamic law:
    • partly or wholly Islamic debt funded projects: The Shard, Battersea Power Station regeneration, London Gateway, the Olympic Village and redevelopment of Chelsea Barracks
    • 6,500 homes in the North-West and the Midlands financed by £700 m from an Islamic bank (Gatehouse Bank).
  • ‘Islamic funds in the UK amount to around $600 million.’
    • including four ETFs and two ETPs listed on the LSE
  • Of the 200 UK based law firms 25 have established dedicated Islamic finance units
  • The majority of Islamic contracts are governed by English law.

See subsequent blog entry on sukuk.

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