Over the past few months, Britain’s Conservative Party has shifted its position on immigration to retain supporters, who seem inclined to side with the far-right UKIP. Now, in a gesture that seems to contradict that shift, Cameron has announced that Britain will be the first Western country to issue sukuk. What motivates this move?
Prime Minister David Cameron announced last week that Britain will become the first Western country to issue sovereign sukuk, an instrument in Islamic finance similar to bonds. Britain is not the first Western country to get involved with sukuk. A US company entered the sukuk market in 2006. As of 2009, Germany and the US respectively held $167 and $123 million in sukuk assets. London itself has become a growing marketplace for the bond, and its legislation has attracted more than $34 billion in sukuk listings around the world in the last five years.
Many are wondering why Cameron made this move, particularly given that Conservatives previously rejected the idea. The political blog Conservative Home has revealed that the Conservatives attacked Labour back in 2008, when Labour talked about introducing similar measures. The site affirms that many of the questions Conservatives posed — such as what kind of assets the chancellor of the exchequer has in mind and how to deal with the conditions for sukuk set by Sharia law — have not been dealt with by the current government. So how can we explain Cameron’s actions?
On the one hand, this move can be explained in political terms. The Conservative Party will need every vote it can get in the next election, and it now has to regain some of the centre ground it lost in attempting to entice current UK Independence Party (UKIP) members. Arwa Abdelbasir Ibrahim, in her article in On Islam, quotes a piece of research from 2010 carried out by the think tank Theos, which showed that British Muslims were three times more likely to vote for the Labour Party as they were to vote for the Conservatives. At the other end of the spectrum, a YouGov poll found that 60% of UKIP’s current supporters voted Conservative in 2010.
Getting involved with sukuk can be seen as an attempt by Cameron to present a more open country, which might soften his image following his party’s tough line on immigration. Indeed, in a recent speech he suggested, “I don’t just want London to be a great capital of Islamic finance in the Western world, I want London to stand alongside Dubai and Kuala Lumpur as one of the great capitals of Islamic finance anywhere in the world.” UKIP have already capitalised on the political opportunity to criticize this suggestion, with writers of its associated political blog suggesting that “for the Sukuk to remain Sharia compliant, it necessarily surrenders itself away from the jurisdiction of the UK civil courts to the Islamic courts. This automatically exposes the UK to elements well beyond its control and to the potential for political disaster.”
The other argument has to do with economics more than anything else. In his speech last week, Cameron pointed out that “Islamic finance is growing 50% faster than traditional banking and…global Islamic investments are set to grow to £1.3 trillion by 2014”. Other Western countries are already involved, although less directly, with sukuk, and banks such as HSBC and Citi have set up banking subsidiaries, according to the BBC.
The arrangements need further sketching, and it remains to be seen how much this will change the political landscape in the next elections. It will be interesting to see how Labour, having considered this possibility in the past, respond to the initiative. How other European countries will act in response to the UK’s initiative will also be interesting to follow. The financial repercussions will probably take longer to manifest themselves, purely because of the complexity of the plan’s implementation, but these will be equally important to track.
