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firms and rating agencies have expert Islamic finance teams serving the global market ,
2014). The strategy adopted by the UK government sought to promote financial inclusion
through alternative finance products. This made Islamic finance products and services available
to the UK Muslim population, which was expected to contribute to projecting London as an
international financial centre catering to the needs of all segments of the population.
The UK Government has introduced proposals and policies to explore how Shari'ah-compliant
student loans could be introduced. It also published guidance for the market relating to specific
requirements for public registration of land purchased through Islamic finance product. Before
this, the UK was the first Western non-Islamic country to recognise and allow many aspects of
Islamic finance practices and product offerings.
One of such earliest initiatives dates back to the 1980s when the first commodity murabahah
transaction was conducted through the London Metal Exchange. In 1982, Al Baraka
International Bank became the first UK Islamic bank that was licensed in the country.
Subsequently, investment banks offered various Shari'ah-compliant products to customers in
the Middle East, even though they were operating out of London.
Further momentum built up in 2000 when the Islamic finance industry received significant
political support and regulatory approval. It culminated in the establishment of an Islamic
finance working group, whose membership comprises representatives from the Financial
Services Authority, the treasury, financial institutions, members of the Muslim community, and
the Council of Mortgage Lenders. The efforts of the working group led to significant policy
reforms, one of which related to the need to provide a level-playing field for both Islamic banks
and their conventional counterparts. The reforms included the inclusion of clauses relating to
Alternative Finance to the Taxation legislation such as the Stamp Duty Land Tax (Exception of
Certain Acquisitions of Residential Property) Regulations 2008, which was amended to avoid
double stamp duty on Shari'ah-compliant mortgages; and the Alternative Finance Investment
Bonds (Stamp Duty Land Tax) (Prescribed Evidence) Regulations 2009.
With regards to Takaful, there have not been proactive steps by the government to promote this
faith-based insurance model. However, the government through the Department for Business,
Innovation and Skills explored the possibility of introducing an alternative student finance
scheme, specifically for students whose religious beliefs forbid them from taking interest-
bearing student loans. A consultation was launched in April 2014 on a draft Shari'ah-compliant
alternative finance product for such student category. A country-wide survey conducted among
the Muslim community and the public in general on the acceptability of the proposed product
led to positive feedback. It led to the enactment of the Higher Education and Research Act 2017,
which according to its Long Title, makes “provision about higher education and research; and to
make provision about alternative payments to students in higher or further education.” The
alternative payments have been structured in the form of Takaful and expected to be rolled out
in 2019/2020.