London is looking to its burgeoning market in Islamic finance to boost its reputation as a financial center, banking on growth in an industry that is partly shielded from the global credit crisis.

An eagerly awaited decision next week by the British government on whether it will borrow money by issuing a sovereign Islamic bond, or sukuk, could open up new avenues in a market that Standard & Poor's estimates could reach $4 trillion overall.

While more than two-thirds of Islamic finance business is currently originated in the Middle East, the oil rich region is increasingly looking to international capital markets to finance their grander development projects -- a $1.5 billion sukuk issue from Dubai Ports World and arranged by London-based Barclays Capital last year allocated 60% of its paper to Western buyers.

A British government sukuk -- which could be announced in next week's annual budget -- would increase liquidity in the market and expand the secondary commercial market in the takaful, or Islamic insurance, sector.

Britain has worked to position London to take advantage of the rapid growth in wholesale Islamic banking. Both retail and wholesale services have grown rapidly since the Islamic Bank of Britain became the first stand-alone domestic bank in the sector to cater to the country's 2 million Muslims just four years ago. There are now also some 23 conventional banks, including Lloyds and HSBC, offering Islamic products.

Today’s Zaman, Turkey, March 8, 2008