A comprehensive overview of Islamic finance structures was presented at an Islamic Finance Seminar organised by Qatar's QInvest in partnership with the London Stock Exchange (LSE) yesterday. The event attracted a broad mix of high-level corporate and industry bodies and Islamic finance practitioners.
Hani Ibrahim, head of Debt Capital Markets, QInvest, spoke about the role that London can play in Islamic Finance. "The UK's strength is its expertise and talent and the legal robustness and framework that it provides," he said.
The key challenge for the UK in relation to Islamic finance, he said, is "getting a critical mass".
He noted that the forthcoming government sukuk is a very strong signal and initiative and said the hope is that "it will drive growth in Islamic finance in the UK to get a critical mass where there is a sizeable Islamic finance industry to be grown on the existing base."
He added: "There is a lot of appetite from the government and we've seen that from the messages from right at the top of the UK government."
Alex Armstrong, head of Structured Finance, QInvest said: "There is a huge gap in the demand for paper. The UK is a huge insurance market and the LSE is a major pull for quality corporate issuers. If the UK gets it right, it can provide a lot of assets for that demand."
Debashis Dey, partner, Clifford Chance, commented that the word 'hub' should be used with discretion when talking about London with regard to Islamic finance.
He said: "I'm not sure that you are going to suddenly move the expertise (in Islamic finance) from the Gulf to London. I don't think that is going to happen." Instead, he anticipated that London will become established as a place "renowned for understanding Islamic finance and creating new products and accessibility".
Looking at the challenges for London he said: "The key challenge is staying in touch and abreast with the developments around the world; understanding what the geographically diverse scholars, investment banks and investors want. London is so full of so many different products competing for its attention that the challenge is to keep its focus on Islamic finance as well."
Stella Cox, managing director, DDCAP Limited, expects London to expand its role as a financial centre relevant to the Islamic financial space because of its "the scope, capacity and depth of its markets". She noted the contribution of the six wholly Shariah-compliant banks operating in the UK.
She observed: "Islamic finance is very established and has achieved considerable mass in a number of different geographical jurisdictions but the challenge now is to join up the global footprint so that there is a more cohesive proposition to expand as the volume of the market increases."
She said: "Historically Murabaha has been a very important tool for the industry because it has been the root of liquidity management disciplines. I think that will continue largely because, certainly in the UK market, Murabaha is very well understood. Firms and institutions are very comfortable with it and the corporate market understands it very well too. If we look at the capital market, I think probably initially it's going to be less issuance of 'exotic' sukuk structures with more of a focus on traditional contracts such as Ijarah."
The moderator for the panel discussion and Q&A at the seminar, Richard Gray, vice-chairman, Panmure Gordon & Co. said: "I think we would be welcomed as issuers in the Islamic finance market place. I also think the lead the UK government has taken, particularly the profile that David Cameron himself has adopted in preparing this new issue, has been taken very positively."
Wayne Evans, adviser, International Strategy, TheCityUK, said: "This is a good gathering and there has been a focus on key issues such as insurance and reinsurance."
Stuart Hutton of Raymond James Investment Services said: "It was a very useful session with some good insights in terms of the work that is going on. Seeing London as a centre of excellence where its skill, the deep markets, the regulation and ability is there -- that is the way forward."
Faraz Naqvi of Hogan Lovells commented: "I think events like this are very good at bringing people together and there was good information on the structures of Islamic finance and where they can be implemented."
Majid Dawood, chief executive, Yasaar Limited, said that it was important to remember that Islamic finance is not only for Muslims -- it is in fact an inclusive market.
© Gulf Times 2014
