Chancellor backs Islamic bonds

The Chancellor is planning to approve Islamic style bonds to raise Middle Eastern money for public spending in the UK, making Britain the first Western nation to issue bonds that meet Islamic rules.

The move could lead to wealthy Middle Eastern businessmen and banks taking ownership of Government buildings and other British assets.

The bonds comply with sharia by avoiding interest payments, classed as ‘sinful’ and are known as sukuk. Bonds issued under current law are debt-based whereas a sukuk is asset-based. Bond holders receive ‘rent’ on the asset rather than interest, complying with sharia.

A spokesman for the National Secular Society said: "Constructing financial instruments to be sharia-compliant seems to involve unnecessary complication, which will only make a lot of lawyers rich."

A consultation exercise on the issue, launched in November, ended on Thursday (February 21).

Also see: Bonds to fit sharia law backed by Chancellor
22 February 2008