12/09/2013 08:35 BST | Updated 12/09/2013 08:35 BST

Scotland a Potential New Hub for Islamic Finance

Scotland is positioning itself as a potential hub for Islamic finance and ethical banking following a major conference held by leading Scottish law firm Tod Murrays and the Islamic Finance Council UK.

The conference discussed the possibility of attracting Middle Eastern investment in Scottish infrastructure and renewable energy projects and outlined the opportunities for ethical investors, to tap into the lucrative industry that is estimated to be worth over $2.3 billion.

The Islamic Finance Council UK (IFC), based in Scotland, estimates that an investment of between £120m and £200m could be invested in Scotland for infrastructure products following a successful Islamic Sukuk bond.

Speakers at the one-day conference included Michelle Kinnaird, Scottish Investment Bank; Peter Knott, Green Investment Bank; and Peter Reekie, Scottish Futures Trust and Gulf Investors who discussed the lucrative opportunities in Islamic ethical financing.

The scope for Islamic Investments in Scotland

The UK has the potential for provision of faith-based financial products that adhere to the ethical principles of Shariah compliant financing. Scotland is now firmly at the centre of this niche market which is growing at an estimated rate of 15-20% per annum.

Head of Banking & Finance at Tods Murray LLP and Executive Board Member of the Islamic Finance Council UK, Graham Burnside said that,

"Recent high profile projects in London have attracted Islamic funding and the there is no reason why Scotland should not gain in the same way. The Scottish Government has made it clear that there are a range of infrastructure and renewables projects in the offing, which are in search of funding, and it is the view of the Islamic Finance Council UK that there is now a window of opportunity to attract major Gulf investment to these areas.

Burnside further added that, "This would almost certainly be structured by way of an issue of sukuk (i.e. Islamic bonds), for which the market is currently buoyant. The combination of the nature of the developments involved and the clear social benefit of the projects should make them a particularly good fit from the perspective of an Islamic investor."

Demand for ethical products

Recent polls have indicated that more than half of Scots want to see some of their money invested using green or ethical criteria - higher than the UK average.

Imran Pasha, Head of Sales and Service at Islamic Bank of Britain (IBB) said that,

"The Scottish market is an important one for IBB. To illustrate, in 2009 IBB specifically designed a Sharia compliant Home Purchase Plan (HPP), the Sharia compliant mortgage alternative, to meet the requirements of the Scottish market. Since then IBB has developed its presence in Scotland and a growing number of customers are taking its savings and home finance products. The Bank is also beginning to attract a number of business customers, particularly those seeking commercial property finance. IBB's Shariah compliant and ethical offering is proving to be popular, particularly in the face of a limited supply of finance to businesses."

He further added that, "At an industry level, Scotland already has strong Islamic finance credentials based on the long-standing work carried out by the IFC and Tods Murray. This, combined with a growing appetite amongst businesses and consumers for ethical finance, puts Scotland in a good position to develop itself as an Islamic finance hub."

With the Islamic sukuk (bond) market surging to over $250bn in 2013 local sector experts believe that if given the right ethical structures Scotland could potentially become a major hub for Islamic finance investments.