Sir David Wootton, Sheikh Bilal Khan, Ladies and Gentlemen, good morning and Assalaamu Alaikum.
I would like to welcome you all to today’s Summit, showcasing the EU as a hub for Islamic finance. I am particularly delighted to welcome you all to London.
You of course already know of London’s history as an international financial centre of great importance and it is also vital in the expansion of Islamic finance in Europe and elsewhere. I am sure many of you will be keen to see how you can participate in the growth of Islamic finance and grasp the opportunities arising from the high growth in the sector.
Conferences and Seminars are wonderful venues for networking and I am sure that you will renew acquaintances with your existing connections and make new contacts for mutual benefits.
The Islamic finance system is founded upon the central theme of achieving sustainable growth and shared prosperity whilst promoting innovation.A great deal of importance is placed upon innovation as it is vital to the creation of new products and services within the sector. Modern Islamic finance emerged in the mid-1970s with the founding of Islamic banks but the growth has been very rapid since the 1990s.
With Islamic finance investments worldwide now worth over $1.8 trillion and forecasted to grow to $2.5 trillion, Islamic finance presents an exciting high-growth market opportunity. Globally the market has grown 50% faster than the traditional banking sector. Shariah compliant assets rose more than 160% between 2009 and 2011.
The UK is the biggest centre for Islamic Finance outside the Islamic world. The Shariah compliant assets in United Kingdom exceed 18 billion dollars.
I would also like to state that I have owned and built successful businesses relating to insurance, financial services and properties and I am Chairman of four companies. In my business career I have dealt with general insurances, life assurance and mortgages. I have actively supported mutual insurance companies and building societies and this is another reason I do like to promote Islamic financial arrangements. The principle of mutuality appeals to me.
I may add that I was the first Muslim to be appointed a Member of the House of Lords by the Conservative Party. I am very active in the House of Lords speaking on a variety of subjects including matters relating to finance, banking, financial services and Islamic finance. I am the Patron of the Islamic Finance Council UK, a body active in four areas – 1) government advisory; 2) promoting linkages between ethical finance and Islamic finance; 3) empowering shariah scholars; and 4) providing tailored executive training.
I am passionate about Islamic Finance and I have spoken on this issue at various meetings in UK and abroad. I am also the Co-Chair of the All Party Group for Islamic Finance and diversity in financial matter. The group was set up in 2010 with the principle aim of raising awareness about Islamic Finance in the United Kingdom.
It aims to do this by: Giving the Islamic financial industry a voice in Parliament to address issues of concern and opportunity, promoting London as a centre of excellence as the leading Western hub for Islamic Finance, address other issues such as inclusivity, diversity, regulation and taxation.
The officers are all members of the House of Commons and the House of Lords from the three main parties. The group also has associate members from the Islamic Finance business sector to reflect the interest, opinions and opportunities from the sector.
In fact it is the British Government’s intention is to establish and maintain Britain as the gateway to international Islamic finance. This has created a level playing field for Islamic financial products in the UK. The British Government would like to ensure that principles of fairness, collaboration and commitment will apply to Islamic financial arrangements and is actively encouraging Shariah compliant transactions.
There has been a history of Mutual Organisations in the United Kingdom. We should note that a life assurance company called Scottish Widows was founded in 1850s and it was the first mutual life company set up in the UK.
Subsequently a number of other life offices were established mainly in Scotland. Most of these mutual offices are now limited companies. In addition several insurance companies had set up Ethical funds which have performed well. In addition to life offices there have a number of co-operative organisations as well as credit unions which are run on mutual basis.
In regard to United Kingdom and Europe, I would like to state that there are now nearly 3 million Muslims in the United Kingdom and 20 million in Europe. In countries like France and Germany there are nearly 5 million Muslims in each country, Italy have over 1.5 million Muslims, Netherlands has over1 million Muslims, Austria has over 500,000 Muslims. The list goes on. If we also reach out to non-Muslims the potential is considerable as the populations of the United Kingdom and Europe are over 60 million and over 450 million respectively.
Islamic finance should not remain a niche, but through its appeal to everyone irrespective of religion, its market should be part of the mainstream market, increasing its potential manifold. Islamic financial institutions should target not only Muslims but also non-Muslims, particularly in Western countries, and their products and the pricing should be such that it appeals to a wider audience. To enable us to succeed in achieving our expansion for Islamic finance we need to develop and market a range of products which will fulfil the needs of people and cater for local conditions in the relevant country where we would like to write business.
I am a Freeman of the City of London and I am very proud of my connections with the city and I have also been a Lloyd’s insurance broker. When I became a Peer I took the title of Baron Sheikh of Cornhill in the City of London.
I am pleased that we have with us today Sir David Wootton who has been the Lord Mayor of London in 2012.
In October 2013 the World Islamic Economic Forum was held in London and it was the first time the Conference was held outside the Islamic world. I believe the organisers were right in choosing London as the venue for the Conference.
We were very pleased to hear the Prime Minister David Cameron announce at WIEF that the British Government will issue a sukuk, which it has since successfully done. The Government has made it very clear of their intent to cement Britain’s position as a western hub for Islamic finance. With the recent issuing of the sovereign Sukuk, this ambition has been realised. We are the first country outside of the Islamic world to issue Sukuk, a feat I believe we should be very proud of. This Sukuk received very strong demand and was more than 10 times oversubscribed. It ultimately raised £200 million pounds on orders totalling around £2.3 billion pounds.
Allocations have been made to a wide range of investors including sovereign wealth funds, central banks and domestic and international financial institutions. Investors from the major centres for Islamic finance in the Middle East, Asia and Britain were all represented in the final allocation. It will have a maturity of five years and use the popular Al-Ijara structure. This is a sale-and-leaseback mechanism that means investors get paid a fixed rental income on properties placed in the structure rather than conventional interest. The Treasury appointed five banks to manage the Sukuk which are HSBC, Barwa Bank, CIMB, the National Bank of Abu Dhabi and Standard Chartered.
It is important that we now use this momentum to attract further investment from Islamic countries. We will lobby for further progress and we will ask whether further Sukuks may be issued in the future. There is certainly the demand for them. The global Islamic finance sector is expected to reach $2 trillion dollars this year, extending to banks, mutual funds, insurance and private equity. The Department for Business, Innovation and Skills have also been investigating the possibility of introducing a Sharia-compliant student finance scheme, to work alongside traditional student loans.
There was widespread concern that many young Muslims were being dissuaded from applying to University because of the interest payments involved with the student loans system. However, Science Minister David Willetts was clear that such Sharia-compliant loans would ensure that “anyone with the ability and desire can go to university”. The consultation on this matter has since closed and the government have confirmed their intention to provide for Islamic student loans.
Similar consideration has been given to introducing Sharia-compliant Start-Up Loans in the UK. The Prime Minister announced this at his Eid al-Adha reception last October. The Muslim community has for some time longed for changes that would offer a ‘level playing field’ between conventional and Islamic products. These recent developments have provided them with just that.
Islamic finance is all to do with ethical forms of investment, and also investing in businesses and industries that are good for society and the environment at large. Islamic financial arrangements work for the benefit of society. For example there are opportunities to invest in the generation of energy by renewable means in UK and overseas. There are also opportunities for Islamic funds to be invested in building of infrastructure in United Kingdom which will help the country and also generate income for the investors.
There are also opportunities for investments from Sharia compliant funds in United Kingdom in other ways. For Example London’s sky line has been transformed by the construction of the Shard. There have been investments in a new stadium for Arsenal Football Club and Etihad have invested in Manchester City. The other investments relate to Thames Water, Harrods, Olympic Village and Chelsea Barracks. These have been funded wholly or in part by Islamic Finance.
There are a number of law and accountancy firms in the United Kingdom which provide professional services in Islamic finance. Furthermore there are numerous institutions offering educational training products in Islamic finance which are more than what is available in any other country.
These organisations also present potential career opportunities that can lead well into the Islamic finance arena.
Therefore the United Kingdom has the organisations and structures to help the expansion of Islamic finance in other countries. I would suggest that countries abroad that are thinking of developing Islamic finance can consider tapping into the expertise and facilities available in London and elsewhere in the United Kingdom.
Furthermore United Kingdom is an important sector for providing of education in Islamic Finance. Universities such as University of East London, Greenwich, Durham, Aston, CASS, Dundee and many others are offering dedicated undergraduate and postgraduate programmes on Islamic Finance.
Britain has long been regarding as a leading intellectual global centre and the education provided by UK institutes plays a key role in providing the human capital to drive future growth in the sector.
I wish to talk briefly about Takaful. I would like to state that in London we have been writing insurance business going back centuries and we have a long history of underwriting all classes of Insurance risks. Although we have been involved in the underwriting of various risks in London for many years, we are indeed very innovative and progressive and we have been at the forefront when it comes to the underwriting of new and different types of insurance covers.
I believe there are opportunities for writing Takaful covers for businesses, mosques and covers for buildings. I feel that Takaful covers for these risks can be developed and there is indeed a market for these covers.
The Global Financial Crisis which started in 2007 is considered by many economists the worst financial crisis since the Great Depression of the 1930s. This was caused partly by bad practices of banks and greed of certain bankers. We are all recovering from the crunch and in fact UK will have the highest growth in the Western world.
Whilst many countries in Euro zone and Japan are in recession our growth this year will be about 3%. The problems in the financial sector made people realise the importance of Islamic finance which is based on ethical principles and transparency. Whilst Islamic finance is relatively in its infancy the underlying value set, if applied correctly, can help to reduce systemic risk and increase social responsibility.
These remain issues that many in the public are keen to see and echoed by Lord Turner and the Archbishop of Canterbury who have made reference to the social usefulness and lack thereof of our current banking sector.
None of the Islamic banks globally were involved in the CDO’s and toxic derivative instruments which bought about the collapse of the banks such as Lehmans. Such opaque, toxic and highly speculative derivative instruments are highly regulated in Islamic finance.
In context of its infancy, Islamic finance may not have all the answers today, however it is clear that many of its values are shared amongst the other great faith traditions where a ban or strong aversion to interest is a common theme.
I recently chaired a meeting which was attended by Muslims, Jewish and Christian leaders including Archbishop of Canterbury. I have in the past spoken in a debate in the House of Lords on bad practises in lending which was led by the Previous Archbishop of Canterbury.
I would now like to talk more about education. The UK now has a number of universities providing courses in Islamic Finance, these include University of East London, Durham University, Reading, Cambridge and Aston amongst others. I am connected with the University of East London. They are conducting courses on Islamic Finance. In addition they also conduct a programme for training of Imams.
The UK has demonstrated global leadership in the education arena and have also pioneered in the area of educating shariah scholars on conventional finance – a programme initiated by the Islamic Finance Council UK.
It is important that we train people who want to work in the United Kingdom as well as train people who want to work overseas.
In regard to business operations I would like to say that I have successfully built up businesses and in fact one of my companies won or were highly commended on 13 major awards over a period of three years. No other company has achieved this. I built up my businesses on the following principles:
1. Produce innovative and excellent products which are competitively priced.
2. Staff need to be adequately trained.
3. Get staff to work as an effective and strong team.
4. Service stands need to be very high.
5. There needs to be adequate marketing.
6. Keep a control on your expenses.
I am sure that some of my views will resonate your own views. I do hope that you enjoy the Conference and also hope you find the discussions both informative and useful in your business lives.