LSE welcomes first Shari’ah compliant exchange traded funds

LSE welcomes first Shari’ah compliant exchange traded funds

The first ever Shari’ah compliant exchange traded funds (ETFs) have been listed on the London Stock Exchange’s main market. The three funds launched by iShares enhance the range of Shari’ah compliant products available in London, underlining the City’s emerging role as an important centre for Islamic finance.

The three funds are the iShares MSCI World Islamic, the iShares MSCI USA Islamic and the iShares MSCI Emerging Markets Islamic. The funds track indices which screen out companies whose business activities involve earning interest, alcohol, arms manufacturing, tobacco, pork-related products, gaming and certain other forms of entertainment prohibited under Islamic law. The funds’ compliance with Shari’ah requirements will be reviewed annually by a Shari’ah Panel.

Commenting on the launch, David Shrimpton head of product management and development at the LSE, said “The launch marks another important step in London’s development as a global centre for Islamic finance. For the first time both British Muslims and the growing number of investors from the Middle East accessing our markets can benefit from the low-cost, instant diversification offered by a range of ETFs while investing in a way that is consistent with Shari’ah principles.

“The range of Shari’ah compliant products listed on the LSE’s main market continues to grow. In the past year and a half we have admitted 14 Islamic finance instruments, or sukuk, to trading on our markets, which have raised in excess of £5 billion.”

The LSE is playing a key part in the drive by the UK Government and the City to enhance London’s position as a global gateway for Islamic finance, and is part of HM Treasury’s Islamic Finance Experts Group, which is currently examining the feasibility of the UK Government becoming an issuer of wholesale sterling Islamic financial instruments.

The UK was the first European country to develop a tax system designed to remove obstacles to the development of Islamic finance and the first in Europe to authorise wholesale and retail Islamic banks.