London has a huge opportunity to lead in Islamic finance and in the sukuk market, the president of the Islamic Development Bank said.

“We have a real opportunity to recognise the potential of Islamic finance here in the UK,” Dr Bandar Hajjar said in a speech at the Sukuk Summit at the London Stock Exchange. “Both the UK government and the IDB are actively promoting this objective.”

The Islamic banking industry has grown at a double-digit rate over the last decade, reaching $3.5 trillion last year alone. But despite this growth, Islamic finance has typically been seen as a specialist or niche activity in the West, Dr Bandar said.

Sukuk – an Islamic bond, structured to generate returns for investors while adhering to Sharia, which prohibits taking interest – is a key part of the Islamic finance system. Total international sukuk issuances reached $95 billion in 2017, after achieving $85 billion the year before, a clear indication the industry is in its early stages and offers “enormous potential for growth” across the world, Dr Bandar said.

Britain is became the first non-Muslim country to issue a sukuk in 2014. Earlier this year, the UK’s Al Rayan Bank also became the first bank in the world to issue a public sukuk in a non-Muslim country.

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More broadly, the UK has become an increasingly important global centre for Islamic finance. Britain’s Islamic finance industry is now the largest of any OECD country, and there are already five standalone Islamic banks in the UK, along with more than 20 other banks that offer Islamic financial services.

“The potential for the future growth of Islamic finance is clear,” Dr Bandar. “London’s emerging role as a hub for Islamic finance is underpinned by historical links with Muslim countries. This will remain strong and get even stronger.”

Wayne Evans, adviser in International Strategy at influential financial lobby group TheCityUK, said that Dr Bandar’s confidence in London’s potential to lead in Islamic finance is justified.

“London is the premier Western centre for Islamic finance,” he told The National. “As the world’s leading financial centre, it is ideally placed to help to develop the market for Islamic finance and cater to the growing needs and ambitions of customers and clients in this space.”

Brexit has led to concerns in some quarters that London’s status as a global financial centre could be at risk. However, Mr Evans believes that the UK’s imminent departure from the EU will have no bearing on its ability to realise its potential in Islamic finance.

“Brexit is essentially a European issue. It shouldn’t affect the UK’s relationship with the rest of the world,” he said. “If anything, it will make London even more determined to build on its international business, and that includes Islamic finance.”

The Jeddah-based IDB, with a subscribed capital of $33 billion, has a funding plan for the first six months of 2018 estimated at $2.5 billion, Dr Bandar said. Subject to market conditions, it will soon launch a benchmark sized sukuk issue, with the proceeds going to foster the economic development and social progress of its 57 member nations.

The IDB has also just launched a new $500 million fund called Engage, which will provide seed money to innovative start-ups and SMEs, helping them implement development projects related to the UN’s Sustainable Development Goals.