It is like spring in the UK this week with the first shoots of recovery from the winter. There is clearly a message here as life follows nature. Are we beginning to see some signs of life in the UK? Some promises of innovation and new initiatives coming from some of the leading players in the Islamic finance market? Pensions and treasury management, not usually the most dynamic areas for innovation, are interesting areas of development which could introduce some significant changes to the domestic market. Property investing in the UK looks like it is poised to take another step forward in new investment opportunities.
A campaign has appeared in various media which is highlighting the savings gap and inequality in the availability of Islamic finance pension products. I was involved in a recent discussion with a conventional fintech which made the point that consumer savings (and therefore bank balances) was rising as the usual larger purchases (notable holidays) have been abandoned.
As we approach the end of the UK tax year, the marketing from insurance companies for this year’s contribution gets dialled up to 10. But where are the equivalent Islamic finance options? The acute shortage of products, rising savings and increasing ability for these new entrants in the market to mobilise social media might just get one of the insurance companies to come to market with a range of products to match the conventional pension options. As investment products primarily, there should be no regulatory impediments to doing so. #wheresmymuslimpension indeed.
A short word about short-dated instruments. An announcement today has confirmed that new to market are GBP and EUR180 per day Sukuk. This issuance of both EUR and GBP short-term Sukuk is an innovation long overdue to bolster Islamic liquidity management options. This example of UK securitization expertise applied to fill a gap in the Islamic finance product landscape is a great step forward for the market as a whole.
Providing access to a wider range of investments includes offering more diverse asset classes not just tax wrappers. Property investing in the UK, be it development finance, Shariah compliant mortgages or through partnerships is nothing new. One initiative which came across my virtual desk (aka screen) was particularly noteworthy as it is as a good an example as I have seen recently of delabellization.
The Shariah compliant nature of the business has been entirely subsumed in a well written website which focusses on the ethics and simplicity of a property transaction. There is no need to use the term diminishing Musharakah (as per the Tolkien securitization from Al Rayan) when the return on the investment and the risk stand for themselves.
I would expect to see more widely available Shariah compliant access (or simply ethical products) to the UK property market, through fintech businesses or structures like the P1 Sukuk, as it is such a globally popular asset class. Ethical investing is a global phenomenon and these initiatives are just the start of a flowering of new initiatives to attract more liquidity and expand the ever growing investor landscape.
Dr Scott Levy is CEO of Bedford Row Capital.
He can be contacted at firstname.lastname@example.org.
This article was first published in IFN Volume 18 Issue 9 dated the 3rd March 2021.