By  Shafaq Asmat

Abstract

This article analyses the emergence, growth and prominence gained by Islamic finance in the Western world using the example of the United Kingdom (U.K.). With the global expansion of Islamic financial markets, the U.K. and particularly London, has become one of the leading Islamic financial centres in Europe. Today London is in a position where it competes to stand alongside established Islamic finance capitals in the Muslim world, such as Dubai and Kuala Lampur. This article examines the growth of the phenomena in the U.K. in light of its significance for the British economy, the Government’s approach to an industry based on Shari’ah principles and the delicate issues presented in accommodating Shari’ah based financing in a secular U.K., particularly in the often hostile and anti-Islamic climate post 9/11. Further, the legal regulatory framework governing Islamic finance in the U.K. is discussed, along with the challenges of accommodating Islamic finance within an established legal framework for conventional banks. While undoubtedly in the foreseeable future the U.K. has the potential to offer an array of opportunities in Islamic finance, the shortcomings of regulating an Islamic financial sector by religiously neutral laws cannot be ignored.