UK government guarantees its first Islamic bond for Emirates

UK Export Finance has underwritten its first Islamic bond in a further sign of the City's growing role in the global market for Sharia-compliant debt.

The government-backed export credit guarantee agency has provided cover for a $913m (£617m) Islamic bond issued by Dubai's Emirates Airline to purchase aircraft including the giant Airbus A380.

Britain recently became the first country outside the Muslim world to issue Islamic bonds, known as Sukuk. The £200m bond issued last year attracted healthy investor interest and was the first step in encouraging wider investment from the region to the City of London.

Chancellor George Osborne has said promoting the Islamic finance industry, which is worth nearly $2 trillion, would help make Britain “the undisputed centre of the global financial system".

More than 20 banks currently offer Islamic financial products and services in the UK, more than any other Western country, with the number expected to grow further.

Sukuk provide fixed returns from underlying assets, thus bypassing the Islamic prohibition on receiving interest. The value of Sukuk already listed on the London market exceeds $34bn (£21bn) over the past five years with more than 50 bonds quoted by the London Stock Exchange.

Formerly known as the Export Credit Guarantee Department, or ECGD, the agency was created soon after the First World War in 1919 as the government tried to revive Britain’s shattered post-war economy by boosting exports.

In total, the agency has about £20bn of liabilities on its balance sheet, but it has recently shifted focus to helping more small businesses obtain the financial support and guarantees they require to tap into fast growing markets in Asia, Africa and the Middle East.