What is islamic finance?
The system of Muslim laws and customs known as Sharia makes no distinction between the spiritual and secular - hence its reach into all facets of a Muslim’s life including the provision and consumption of financial services. Islamic Finance therefore refers to the financial services provided under the influence of Sharia law.
In 2014, the size of the Islamic finance market was estimated to be between US$1.5 and US$2.5 trillion
That equates to around 1% of global financial assets or the size of HSBC’s balance sheet.
Islamic finance reflects the spiritual code by which many Muslims choose to lead their lives, most commonly known for its prohibition of alcohol and tobacco, gambling, speculation and the adoption of undue risk, and the receipt of interest for lending (known as riba).
The appeal of this ‘negative screening’ is not limited to Muslims however, with many non-Muslims also choosing Sharia-compliant financial services.
By 2020, the size of the Islamic finance market is expected to have doubled in size to 2% of global financial assets
Some of the firms that have chosen to take advantage of the Islamic finance expertise in Guernsey include:
In 2013, Guernsey was home to a particularly innovative deal, which combined insurance-linked securities (ILS) with sukuk, which are Islamic bonds. Salam III, Wakalah Programme was the first ever securitisation of takaful, a Sharia compliant insurance policy.
The Guernsey office of Bedell was counsel to the issue and the issuer, while Aon Guernsey was appointed as the insurance manager and Salam III listed on the Guernsey-headquartered The International Stock Exchange (TISE).
In 2014, Bedell Cristin won an award at the Islamic Finance News Awards for the $100 million ILS deal which was judged the best in Europe.
In 2010, Argyll Investment Services Limited launched the World Shariah Funds PCC, an open-ended protected cell company listed on TISE and distributed globally. The company brings together funds managed by three different investment managers under one umbrella.
Strict criteria have been applied to the selection of the companies whose shares are held within the Sharia-compliant investment funds. These specifically exclude, amongst others, companies dealing in alcohol, pornography, tobacco, or those with highly-leveraged balance sheets.
Trident Trust in Guernsey acts as the company’s principal manager as well as its administrator, registrar, paying agent and listing sponsor. The company’s custodian and legal counsel are also based in Guernsey.