4.

Conclusion: Strategic decisions or operational fundamentals that will strengthen the

Islamic finance's position in United Kingdom.

i. Nature of Politic System

In order to have a growing and sustainable development of Islamic Finance in United Kingdom,
the UK government has showed their supportive and ambitions attitude in various documents
and occasions like pragmatism, realism, and inclusiveness that relating to the development of
Islamic finance in the UK. In the official documents that published in the end of 2008, the UK
government has mentioned that the main objectives of the development of the Islamic finance in
the British are two-fold. The first objective is to establish the UK as a gateway for international
Islamic finance in order to enhance the UK ‘s competitiveness in financial services. The second
objective is to make sure that every individual has access to competitively priced financial
products without relating to their religious beliefs. (Belouafi, 2014). Islamic finance products,
instruments, and services will become more widely available, stimulating market competition
among financial institutions. This could result in more opportunities for the country to attract
FDI, as well as more affordable long-term capital and a wider range of financial products.
Moreover, increasing use of Islamic finance could help facilitate foreign investment in the
country’s major infrastructure and Public Private Partnership projects. (British Embassy Bishkek,
n.d.)

ii. Looking for New Alliances

Islamic finance can be further developed by work together with the conventional Western
mainstream banking and financial sector. This can help Islamic finance to receive more
recognition and approval from the regulators and authorities in the countries where Islamic
finance is significant in operations, visibility, and presence. The new alliances can help the new
set-up companies to seek for partnerships with alternative forms of banking and finance. For
instance, USA is the first country that success in crowdfunding, and it is start practicing in UK
and other European countries. Crowdfunding platforms is a type of equity-based fundings, and it
is alternatively in line with the general Shari’ah compliant. Hence, it is a great opportunity for
Islamic finance to explore the cooperation with the leading crowdfunding players. Moreover,
crowdfunding has a similarity with benchless banking, which is a preferred model in UK and
other western countries, as it is cost effectiveness and it is promoted as a means of enhancing
financial inclusion by a number of banking regulators in developing and emerging nations.
(Takaful IKHLAS, 2015).

iii. Quantification of Demand

The initial procedure towards developing International Banking Facility (IBF) is to identify and
quantify demand for Islamic financial services in the targeted markets. No countries in the world
have adapted a systematic approach to determining the demand for Islamic banking except
Pakistan. US need to have an objective view on the demand and its nature so that UK able to
develop an effective strategy that suitable for growth and competition. Research on authentic
market is unquestionably important to devise a comprehensive and dynamic model of Islamic
financial system. In case of Pakistan, for example, the State Bank of Pakistan (SBP) appointed

a Knowledge, Attitude and Practices (KAP) study to quantify demand for Islamic banking in the
country. The study was conducted by the UK department for International Development (DFID)
and undertaken by Edbiz Consulting. The concept like Shari’ah premium and displaced
commercial risk (DCR) have direct inferences for growth and competition. However, these
concepts were presented to Islamic banking without any objective justification. It seems that the
Islamic bankers want to practice Islamic banking as close as the conventional banking. The
Islamic bankers have highlighted the unique risks like DCR and suggested mechanisms like
profit equalization reserve (PER) and investment risk reserve (IRR). This is necessary to run a
test on hypotheses around applicability of such concepts in the context of IBF, which gather a
real data rather than opting for subjective analyses. In Pakistani Islamic banking, empirical
research on the relevance of DCR reveals that 62% of respondents would not withdraw money
from an Islamic bank if it announced a profit rate that was lower than the market rate of return.
Besides, DCR was not found to be contributive significantly to the construction of demand index
for Islamic banking. Empirical studies like KAP can help determine and evaluate the demand for
Islamic banking and the factors that affect it. UK can apply the similar empirical studies to
understand the demand and factors that influence the market. (Takaful IKHLAS, 2015).

iv. Development of New Market

Arab Spring sparked excitement in favor of International Banking Facility (IBF).it has taken
much longer than anticipated for IBF to be implemented in these nations. Political unrest in other
nations has not been altogether beneficial. Similar to this, the rise has been very sluggish in
certain African nations like Kenya and Nigeria after some initial fervor. Al Baraka International,
the first Islamic bank in the UK, opened its doors in 1982. The development of customized
Sharia-compliant trade financing, leasing, and project finance packages followed this. UK
Government started to take a significant interest in Islamic finance, and developed a work
programmed stop make the UK’s financial services regulations compatible with the rise of
Islamic finance. Another crucial step in enabling the industry to expand was changing the tax
structure so that financial transactions involving conventional and Islamic finance with identical
purposes would generate equal tax bills. To service this growing industry, a widescale
programmed of professional education and training in Islamic Finance developed. The UK
government also contributes significantly to the smooth execution of these agreements. This has
sent a message to the rest of the world that the UK is the place to go if investors want to make
Sharia-compliant investments and gain access to the highest product standards. The largest
center for Islamic finance outside of the Muslim world is in London. (New Market 2022).

v. The Need for a Centre of Excellence for Research and Development in International
Banking Facility

This essay tries to document the most recent advancements and expansion of Islamic finance (IF)
in the UK. The study intends to offer light on the elements that have been cited as being
responsible for this phenomenon's emergence in this nation. The paper applies historical and
thematic analytical approaches to these goals in order to derive some conclusions and
suggestions. The findings indicate that, in the West, the UK is the leading nation in terms of the
number of institutions and universities engaged in IF-related educational and training activities,
the number of licensed intermediaries offering 'Islamic' financial services, and the number of law
firms offering legal and consulting services in this area. Investment in prestigious infrastructure
and regeneration projects, including world-famous structures like the Olympic Park, the Shard,
and the Battersea redevelopment, have been drawn by investor confidence in the UK's Islamic
Finance offer. Recently, Kuwait-based Gatehouse Bank, a Sharia-compliant bank, committed to
creating a scheme of social housing that is available for rent. The most recent Airbus agreement
demonstrates how a robust Islamic Finance offering may result in large export successes. All
schools of thought are able to flourish because to the framework that the UK has established for
Islamic finance. Our strategy is to confirm the financial stability of any Islamic Finance product.
Deal participants should determine whether any specific good or service aligns with their values.
(Development and growth 2022)

vi. Development of Global Leadership in International Banking Facility (IBF)

Islamic financing in the UK has grown most significantly. However, Shariah-compliant

transactions have existed in London's financial markets since the 1980s. Insignificant amounts of
commodity Murabaha transactions on the London Metal Exchange were utilized to provide
liquidity to Middle Eastern institutions and other investors, which aided in the growth of a
wholesale market in the UK. The UK overview the introduction of retail Islamic goods in the
1990s, however on a very small scale. Several banks from the Middle East and Southeast Asia
started providing straightforward goods, like home financing. These, however, were inferior to
their traditional counterparts in several ways, including their often-uncompetitive pricing. On
both the wholesale and retail sides, product quality has increased, a larger selection of products is
now available, and more competitors have entered the market. Many businesses, both Islamic
and non-Islamic, view London as an increasingly significant global hub for Islamic financing
today. The UK financial services sector has a track record of creating and delivering novel
products, and it has access to a sizable talent pool in the fields of law, accounting, and financial
engineering. Many of these companies have since opened new locations or enlarged existing
ones in other Islamic centers. Many Islamic financial operations already use English law as their
chosen legal system. (Development 2022).

Reference:

Takaful IKHLAS. (2015). Global Islamic Finance Report 2015 (No. 10).

http://www.gifr.net/gifr2015/ch_06.pdf
Belouafi, A. (2014, May). Islamic Finance in the United Kingdom: Factors Behind its

Development and Growth. ResearchGate.

https://www.researchgate.net/publication/282852113_Islamic_Finance_in_the_United_K

ingdom_Factors_Behind_its_Development_and_Growth

British Embassy Bishkek. (n.d.). Islamic Finance in UK.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/

attachment_data/file/503491/2015047_Is_Fin_A5_AW_ENG_WEB.pdf

Development (2022). Islamic Finance in UK

https://mbri.ac.ir/userfiles/file/Islamic%20Banking/%D8%A8%D8%A7%D9%86%DA

%A9%20%D9%85%D9%82%D8%A7%D9%84%D8%A7%D8%AA/Islamic

%20finance%20data/The%20Development%20of%20Islamic%20finance%20in%20the

%20UK.PDF

New Market (2022). Islamic Finance in UK

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/

file/503491/2015047_Is_Fin_A5_AW_ENG_WEB.pdf