KUALA LUMPUR: London’s global finance centre is keen to further develop its portfolio of Islamic financial services, especially in the asset management class, said the Lord Mayor of the City of London Roger Gifford.
“Traditionally, we are more on borrowing and debt side — how to borrow or structure deals and whether (the financing) was for commodities or properties.
“There has increasingly been discussions on asset management industry, and if I were to predict, it is going to be of interest in years to come, especially on the investment side,” he said in an interview in London on Monday.
London’s financial district has grown huge in asset management terms based on the amount of money and banking capital held.
“London has never seen so many foreign banks,” he said.
In its midst, London has 50 foreign banks and five new Chinese banks. In the past few years, more banks from West Asia have been coming to the city, together with those from Korea, Brazil and India.
London already has a wide representation of Islamic financial products offered by 25 banks matched by the same number of law firms in the city by way of offering expertise.
Five leading British banks offering Islamic finance services are HSBC Bank, Royal Bank of Scotland, Barclays, Lloyds Banking Group and Standard Chartered.
“We need a great body of investors, both individual and institutional, to encourage the growth of syariah-compliant debts,” Gifford said
The World Islamic Economic Forum (WIEF) to be hosted in London at Excel from October 29 to 31 will stimulate knowledge about Islamic financing and economies such as the Gulf Cooperation Countries, Malaysia and Indonesia, and their use of syariah-compliant products.
“Malaysia is a keen player and widely seen as a driver — be it in products, governance and regulations, compliance.”
In the case of London, the infrastructure for the disbursement of Islamic financial instruments is well in place, especially in both the tax and legal areas.
“What we need is to stimulate demand on the investment side,” he said.
There has been a delay in the issuance of sukuk from London due to the lack of demand.
Gifford said although the UK government has looked at it, the cost versus the availability of money factors, has not made it a persuasive choice.
“Anyone can issue the bond but you need someone to buy and today there are only about one to two institutions which do so. We need to have more institutions on board to buy the bond and understand why it is a good investment.”
“As the market deepens and the type of investment products broadened, there will be more interest in the kinds of the bond the UK will issue at the right price… but it is not there yet.”
The London Stock Exchange is a key global venue for the issuance of sukuk and according to its webiste, to date over US$34 billion (RM109 billion) has been raised through 49 issues of these alternative finance investment bonds on the London Stock Exchange.
The Exchange offers the choice of two routes to market – the Main Market or the Professional Securities Market.
Asked about the potential areas of growth in Islamic finance, Gifford said the demand would likely come from the property finance and infrastructure sectors.
The landmark Shard of Glass building is partly financed by Islamic finance and Gifford said the market would show more excitement if more is learnt about infrastructure projects in GCC and Malaysia which have utilised it.
“Islamic finance is exciting and interesting as it creates a partnership between the borrower and lender for every loan or issuance. And, it is enforced through the language around Islamic finance.
“That is a nice concept and sound good to the society coming out of the financial crisis.”
In London for instance, it is the responsibility of the city to `improve the health’ of capitalism and Islamic finance offers and interesting discussion in this regard.
Gifford said Prime Minister Datuk Seri Najib Razak’s presence at the WIEF is a big deal for the city as it would stimulate further discussion about Islamic finance which has also been coined as `partnership finance’ in some countries.
“Malaysians are well represented in London through investments and more are aware of Malaysia as a growing cog in the economy – that is a positive for UK-Malaysia relations.”
On whether the UK’s heightened interest in developing Islamic finance in London would outpace Dubai and Kuala Lumpur, he said increased activities would lead to bigger exchange of ideas across markets.
He will meet officials of Bank Negara Malaysia, the Attorney General’s Chambers, Securities Commission, Tabung Haji and PNB during his three-day visit before he leaves for Jakarta.
Gifford, whose one-year elected term will end next month, said he plans to rejoin the Swedish bank where he has worked in the past.