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British government about to issue Islamic bonds


British government about to issue Islamic bonds


Britain is to issue Islamic bonds in the next few weeks, the first time that has been done by a non-Muslim country.

It will raise 200 million pounds (250 million euros) with the bonds which are due to mature in five years.

Known as sukuk – the bonds comply with Islamic sharia religious rules forbidding the paying of interest.

It is part of efforts by the UK government to make London a hub of Islamic finance, rivaling centres in Asia and the Middle East.

The sukuk will use what is known as a 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.

A government backed sukuk could help the UK’s Islamic banks manage their short-term liquidity needs.

Luxembourg, Hong Kong and South Africa are all planning similar bonds to diversify their sources of funding.

with Reuters

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