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Miller, Linklaters’ global head of Islamic finance, who advised the UK government on the western world’s Shariah-compliant bond issuance, discusses the offering and the growth of Islamic finance in the west.
Britain has become the first country outside the Islamic world to issue sovereign Sukuk, the Islamic equivalent of a bond. The government confirmed that £200m of Sukuk, maturing on 22 July 2019, have been sold to investors based in the UK and in the major hubs for Islamic finance around the world. The profit rate on the Sukuk has been set at 2.036% in line with the yield on gilts of similar maturity.
What are the reasons for the popularity of this first issue?
The issue of a sovereign Sukuk by the UK government is something that has been talked about since 2008/09, when the previous administration had raised hopes that this would happen. The intervention of the global financial crisis was in large part a factor
behind the previous attempt not progressing.
This time around, the government announced its intention as part of a wider drive to further strengthen the position of London and the UK as the centre for Islamic finance in the West. This meant that a lot of investors knew it was coming and wanted to
acquire their own slice of modern financial history. Islamic finance is an international industry that attracts investors from across the world. The majority of recently issued Sukuk have been oversubscribed by various multiples, evidencing continuing
demand, not least because of the shortage of quality assets. The near 12 times over subscription and eventual allocation of the UK Sukuk to investors across Europe, the Middle East and Asia has, to a certain extent, reflected both the continuing demand
and typical Sukuk allocation.
How do Islamic bonds differ from traditional sovereign bonds?
Most Islamic bonds have a similar
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