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Bahrain and the UK take the lead on Islamic finance

The Kingdom of Bahrain and the UK held a joint summit on Islamic finance on 8 April at the Foreign & Commonwealth Office (FCO) in London.
 
The summit was designed to forge a partnership to uncover new commercial opportunities in both markets.
 
During the summit, representatives from Bahrain and the UK signed a Memorandum of Understanding (MoU) that sets out a strong framework to boost collaboration. Initiatives include an education and skills programme, with a proposed internship exchange scheme, and a joint working group to develop mutual Islamic finance trade and investment.
 
Speaking at the event, Senior Foreign Office Minister Baroness Sayeeda Warsi highlighted that: “Bahrain is considered an established innovator in Islamic finance” and “with the largest concentration of Islamic finance institutions in the region, Bahrain is one of the pre-eminent Islamic finance centres in the Gulf.”
 
The Islamic finance opportunity
 
The Islamic finance industry continues to grow, with global Islamic banking assets held by commercial banks forecast to increase beyond $2 trillion by 2014, and GCC Islamic banking assets reached $131 billion by the end of 2013.
 
What’s in it for the UK?
 
The UK intends to make London a leading Western hub for Islamic finance through greater global involvement. It is already highly active in the sector: numerous institutions provide Islamic finance with a number operating fully as Sharia-compliant banks. Several universities offer specialist courses and qualifications, while the government has appointed advisors to develop the issuance of a Sovereign Sukuk (financial certificate or bond).
 
And the commitment is moving on apace – the summit followed soon after two other major Islamic finance events that the UK has hosted: the World Islamic Economic Forum in October 2013, and the inaugural Global Islamic Finance and Investment Group (GIFIG) meeting in March 2014.

Why Bahrain for Islamic finance?
 
Bahrain is a natural partner for the UK, not least because close relations between the two countries go back exactly 200 years – to 1814.
 
The UK values Bahrain’s expertise in Islamic finance. The Kingdom has long been regarded as an innovator in the sector, and was the first country in the world to develop and issue an international Sovereign Sukuk in 2001, which kick-started the Gulf Cooperation Council (GCC) Islamic capital market.
 
Bahrain has been the Gulf’s financial capital for over 40 years. It has more than 400 financial institutions and one of the highest concentration of Islamic banks in the Middle East – 24 banks with assets totalling $23.1 billion. This does not include conventional banks with Islamic banking divisions.
 
The ICD-Thomson Reuters Islamic Finance Development Indicator (IFDI), a numerical measure launched in December 2013 that represents the overall health and growth of the Islamic finance industry worldwide, highlighted Bahrain’s developed Islamic finance sector, which ranks first in the Middle East and North Africa (MENA) region. Bahrain also had one of the most developed Islamic Finance knowledge landscape, and performed well in terms of governance, with a comprehensive regulatory framework covering all aspects of Islamic Finance.
 
For Bahrain, the partnership offers an increased scope for business, while the new spirit of cooperation will enable the Kingdom to develop common standards between international Islamic finance practitioners, further strengthening its position in the field.
 
Referencing the FCO’s press release on the summit, the Governor of the Central Bank of Bahrain, H.E. Rasheed Mohammed Al-Maraj, said: “Today marks an important day in the long history of Bahrain-UK relations as the two countries will be extending significant cooperation to each other to promote Islamic banking and finance.”