Diversification of Islamic Financial Instruments
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Indices and Funds
UK has also been the leader in the Shariah Compliant Indices, with their FTSE Shariah Global
Equity Index Series that has been designed to be used as the basis for Shariah-compliant
investment products that meet the requirements of Islamic investors globally.
According to ICD Thomson Reuters197, the net assets of Islamic funds in the UK amount to
around $600 million. A total of seven Sharia compliant ETFs and two Sharia compliant ETPs
are listed on the LSE. BLME launched the first Sharia compliant fixed income fund in March
2009 and it remains the only Shariah income fund that is rated A by Moody’s, the international
rating agency.
UK Sovereign Sukuk
On 2nd July 2014, UK government became the first western country to issue a sovereign Sukuk
capping an effort to mainstream Islamic Capital Markets in London. The issue by Her Majesty’s
Treasury through its wholly owned subsidiary HM Treasury UK Sovereign Sukuk PLC, of a
£200 million Sharia-compliant trust certificate using a Sukuk al Jjarah structure constituted a
seminal moment. The structure as taken from the offering document is provided below. Based
on an Ijarah structure, the proceeds of this specific issue were used to acquire the lease of
certain land and buildings from The Secretary of State for Communities and Local Government
(DCLG). The properties were then sub-leased back to DCLG in return for DCLG making periodic
rental payments. These rental payments are to be used by the issuer to fund its distributions to
the Sukuk holders.
Briefly the steps included in the process are summarized below.
 UK crown established a subsidiary named HM Treasury Sovereign Sukuk PLC (HTSS)
to issue the Sukuk.
 HTSS issues Sukuk certificates to public with total amount of £200 million in the form
of Trust Certificates
 HTSS using the money raised buys land and buildings from the government within
London district.
 Once the legal possession of the land and buildings is transferred to HTSS, the HTSS
leases these building and land to DCLG.
 DCLG will make semin annual rental payment for the use of the land and buildings,
which is transferred to the investors.
 At the maturity, DCLG has promised to buy the land and building from the investors,
which will act as the redemption of the Sukuk.
197 ICD-Thomson Reuters Islamic Finance Development Indicator (IFDI)