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LONDON – Prime Minister David Cameron is launching a new Islamic Market Index on the London Stock Exchange on Tuesday, part of a wider British effort to tap into the burgeoning market in Islamic finance.
According to prepared remarks released to journalists ahead of time, Cameron is expected to say that the British capital is "the biggest center for Islamic finance outside the Islamic world. And today our ambition is to go further still."
"I don't just want London to be a great capital of Islamic finance in the Western world," he is due to say. "I want London to stand alongside Dubai as one of the great capitals of Islamic finance anywhere in the World."
The market in Islamic investments has grown dramatically since 2006, and its value is expected to hit 1.3 trillion pounds ($2 trillion) next year. Malaysia's capital, Kuala Lumpur, is regarded as its hub, but London has been courting the industry aggressively.
Islamic finance conforms to Islamic law, or Shariah, which forbids charging interest and requires deals to be based on tangible assets. Speculation is banned, as is dealing in futures. Although still small compared with the world of mainstream finance, Islamic finance is expected to hold growing appeal for Gulf investors seeking to invest oil revenue or pious Muslims who want retail Islamic banking services.
The London index — which would track the ups-and-downs of Shariah-compliant investments — is being launched as Cameron seeks to make Britain the first country outside of the Muslim world to issue an Islamic bond sometime next year. It is expected to be worth around 200 million pounds.
The announcements are meant to coincide with the World Islamic Economic Forum being held in London.
King Abdullah II of Jordan, Afghan President Hamid Karzai and Prime Minister Nawaz Sharif are among the nearly 1,800 political and business leaders expected in London for the meeting, which for the first time is being held in a non-Muslim country.
Alex Conroy, a trader at Spreadex, said that the U.K.'s effort to diversify business could be seen as a way to stay competitive in the finance world as Britain faces the prospect of caps on bankers' bonuses.
"By welcoming all foreign investment this should ensure London remains a leader in global finance," he said in a note.
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