Global cities race to become Islamic finance hubs (page 2 of 2)

Japan wants to be the first nation in the G-7 to issue a sovereign sukuk bond - that is, if Britain doesn't get there first.

And Hong Kong Chief Executive Donald Tsang has said that he wants to develop an Islamic bond market in 2008, in order to boost the region's global financial standing.

London leads race to be Shariah capital

Among cities outside the Muslim world, London is the strongest Islamic finance centre.

'I think London will give Malaysia and the rest of the Islamic world a run for its money,' said Mark Toh, chief executive of Prudential's fund management business in Malaysia.

He believes London has all the strengths of a traditional financial centre, from a solid infrastructure to a qualified pool of prospective employees. Singapore, also seeking to attract Islamic capital, has the same lures but to a lesser degree.

London is already enjoying some success as a focal point for international Shariah-compliant investors, with both corporations and countries listing sukuk bonds in Britain.

London is also benefiting from New York's relative indifference to Islamic finance, which removes from the race a long-standing rival for global capital.

Analysts at Standard & Poor's have argued that America's financial capital has a narrower appetite for Islamic assets than other centres.

So far New York investors have shown an interest in Shariah-compliant equities, but not in Islamic bonds or in takaful, which is Islamic insurance.

One reason for New York's low interest level: European and Asian governments have been eager to change regulations to adapt to and attract Islamic finance - Britain, for example, struck down a law that double-taxed homebuyers who used a murabaha, a two-part Islamic financing structure, rather than a mortgage.

The US government, on the other hand, has shown little interest in chasing domestic or international investment in Shariah-compliant products.

That's not slowing down the rest of the world. With governments eager to grab a piece of the Islamic finance action, we can expect the competition to intensify over the next year.

See also:
Listen: Noor Bank launches service for the 'unbankables'
Listen: Islamic finance outstripping market growth
The rise of Islamic finance