New Islamic finance initiative launched
Britain has become the first non-Islamic country to issue an Islamic sovereign Sukuk, the Islamic equivalent of bonds. The Government has confirmed that £200 million of Sukuk, maturing on 22 July 2019, have been sold to investors based in the UK and in the major hubs for Islamic finance around the world. The offer was oversubscribed with orders totalling approximately £2.3 billion.
HM Treasury confirmed that allocations have been made to a wide range of investors from the Middle East, Asia and Britain including sovereign wealth funds, central banks and domestic and international financial institutions. The profit rate on the Sukuk has been set at 2.036% in line with the yield on gilts of similar maturity.
The Chancellor of the Exchequer George Osborne said:
‘We have seen very strong demand for the Sukuk, resulting in a price that delivers good value for money for the taxpayer. I hope that the success of this government issuance will encourage further private sector issuances of Sukuk in the UK.’
The Government issued Sukuk uses the Al-Ijara structure, the most common structure for sovereign Sukuk, with rental payments on property providing the income for investors. The Sukuk is underpinned by three central government properties.