The continued rise of Islamic finance in the UK

Despite the clear political will for the UK to become an Islamic finance hub, there are steep political challenges ahead.

At the ninth annual World Islamic Economic Forum in London on 29 October, David Cameron announced that he wants to see London standing shoulder-to-shoulder with Dubai and Kuala Lumpur as one of the great global centres of Islamic finance. In saying this, he declared that he intends Britain to become the first non-Muslim state to issue sukuk – Islamic bonds that are structured in such a way as they do not infringe upon Sharia law.

While the issue size is expected to be relatively modest – approximately £200m in the first instance – the announcement should rightfully be seen as a symbol of the square mile’s desire to capture a large share of the growing Islamic finance market. Few would dispute the wisdom of this move, for the growth of Islamic finance since the first sukuk was issued in Malaysia in 2000 has been very impressive.

The global Islamic economy, which includes the Islamic finance industry, is estimated to have a total value of $8 trillion. Sukuk have been used since their inception as a means for corporates and states to raise alternative financing. In light of the global crisis and liquidity squeeze, Islamic finance has grown exponentially. On this basis, it would be strange in a sense for London and other global financial centres not to try to gain some market share and we should expect announcements similar to that of Cameron’s from spokespeople in New York, Frankfurt, Paris, Hong Kong and Singapore.

The growth of Islamic finance is attributable to many different factors, but that growth would not have been possible without the development of the contemporary financing techniques or structures that underpin the industry. For this, sukuks today can be seen as a union between religious principles and modern financing techniques. One can understand the appeal of sukuk, particularly in light of the banking crisis that has gripped the Western world and beyond since 2008, for in some senses it can be seen as a more tangible investment than a conventional bond, because the sukuk owner has a stake in the underlying asset rather than a share of debt. So while a conventional bond holder essentially receives interest on a loan, the sukuk holder receives a share of profit derived from the commercial ventures of the business, rather than on interest (interest is strictly forbidden under Sharia law).

However, despite the clear political will for the UK to become an Islamic finance hub, there are undoubtedly challenges lying ahead. An obvious area of weakness is a lack of indigenous expertise in terms of awareness of the range of financial products on offer and the various structures that can be implemented to make finance initiatives Sharia-compliant. Although there are Islamic finance practices operating out of London, there is still a dearth of expertise. Furthermore, regulation standardising practices and giving confidence to borrowers will be required to grow the industry. However, these are not immutable, nor insurmountable, obstacles.

As uncertainty persists in certain parts of the global economy, it has created an opportunity for Islamic finance to continue to flourish and expand into new economies. The UK has put down a marker in aiming to be the first western nation to issue sukuk and such a move is to be welcomed by the markets and legal and financial services. If some of the challenges are removed then watch this space, for it would be a brave individual who discounts the possibility of further growth in this intriguing market. There are currently 50 sukuk listings on the London Stock Exchange – expect many more to come.

Left to right: Hamid Karzai, Hassanal Bolkiah, Najib Razak, David Cameron, King Abdullah II, Prince Salman bin Hamad al-Khalifa and Atifete Jahaga at the 9th World Islamic Economic Forum in London. Photograph: Getty Images.

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A swimming pool and a bleeding toe put my medical competency in doubt

Doctors are used to contending with Google. Sometimes the search engine wins. 

The brutal heatwave affecting southern Europe this summer has become known among locals as “Lucifer”. Having just returned from Italy, I fully understand the nickname. An early excursion caused the beginnings of sunstroke, so we abandoned plans to explore the cultural heritage of the Amalfi region and strayed no further than five metres from the hotel pool for the rest of the week.

The children were delighted, particularly my 12-year-old stepdaughter, Gracie, who proceeded to spend hours at a time playing in the water. Towelling herself after one long session, she noticed something odd.

“What’s happened there?” she asked, holding her foot aloft in front of my face.

I inspected the proffered appendage: on the underside of her big toe was an oblong area of glistening red flesh that looked like a chunk of raw steak.

“Did you injure it?”

She shook her head. “It doesn’t hurt at all.”

I shrugged and said she must have grazed it. She wasn’t convinced, pointing out that she would remember if she had done that. She has great faith in plasters, though, and once it was dressed she forgot all about it. I dismissed it, too, assuming it was one of those things.

By the end of the next day, the pulp on the underside of all of her toes looked the same. As the doctor in the family, I felt under some pressure to come up with an explanation. I made up something about burns from the hot paving slabs around the pool. Gracie didn’t say as much, but her look suggested a dawning scepticism over my claims to hold a medical degree.

The next day, Gracie and her new-found holiday playmate, Eve, abruptly terminated a marathon piggy-in-the-middle session in the pool with Eve’s dad. “Our feet are bleeding,” they announced, somewhat incredulously. Sure enough, bright-red blood was flowing, apparently painlessly, from the bottoms of their big toes.

Doctors are used to contending with Google. Often, what patients discover on the internet causes them undue alarm, and our role is to provide context and reassurance. But not infrequently, people come across information that outstrips our knowledge. On my return from our room with fresh supplies of plasters, my wife looked up from her sun lounger with an air of quiet amusement.

“It’s called ‘pool toe’,” she said, handing me her iPhone. The page she had tracked down described the girls’ situation exactly: friction burns, most commonly seen in children, caused by repetitive hopping about on the abrasive floors of swimming pools. Doctors practising in hot countries must see it all the time. I doubt it presents often to British GPs.

I remained puzzled about the lack of pain. The injuries looked bad, but neither Gracie nor Eve was particularly bothered. Here the internet drew a blank, but I suspect it has to do with the “pruning” of our skin that we’re all familiar with after a soak in the bath. This only occurs over the pulps of our fingers and toes. It was once thought to be caused by water diffusing into skin cells, making them swell, but the truth is far more fascinating.

The wrinkling is an active process, triggered by immersion, in which the blood supply to the pulp regions is switched off, causing the skin there to shrink and pucker. This creates the biological equivalent of tyre treads on our fingers and toes and markedly improves our grip – of great evolutionary advantage when grasping slippery fish in a river, or if trying to maintain balance on slick wet rocks.

The flip side of this is much greater friction, leading to abrasion of the skin through repeated micro-trauma. And the lack of blood flow causes nerves to shut down, depriving us of the pain that would otherwise alert us to the ongoing tissue damage. An adaptation that helped our ancestors hunt in rivers proves considerably less use on a modern summer holiday.

I may not have seen much of the local heritage, but the trip to Italy taught me something new all the same. 

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear