A number of interesting observations came to light during the Islamic Enterprises conference in London recently, and clearly meaningful progress has been made in this sector but the currently untapped potential in the market presents a valuable opportunity.

The current position of the Islamic finance industry seems very impressive in terms of numbers — a global market of $2tn which is expected to double by the 2020s. Though the numbers are sizeable, Islamic finance assets still only account for approximately 1pc of the total global banking assets in the world today, suggesting extensive room for growth.

As per the latest figures available to the Islamic Financial Services Board (IFSB), more than 80pc of Islamic banking assets consist of fairly simple Islamic banking products such as deposits and residential mortgages — this suggests a lack of innovation in the market and a lack of finance to fuel productive enterprise. Another 15pc of the assets are tied in to Sukuk (Islamic bonds) suggesting a similar trend.

In terms of regional distribution more than 75pc of the assets originate from the Middle East followed by 20pc from Asia — this suggests dominance by Muslim majority countries, which can be expected but perhaps should not be accepted as the status quo.

The basic tenets of Islamic Finance suggest a financial system that values social responsibility, justice, ethics and equality. Any society in the world that recognises the importance of these characteristics should be a viable market for Islamic financial services.

The UK’s importance as a centre for Shariah-compliant finance dates back to the early 1990s, when the first Islamic mortgages were made available to house-buyers in Britain. However a real signal of intent came in 2013 when David Cameron, the then prime minister, declared an ambition for London to be the leading hub for Islamic finance in the Western world.

Today there are five stand-alone Shariah compliant banks in the UK — more than any other country in the West — and another 15 institutions offering Islamic financial products.

The construction of a number of iconic infrastructure developments has been funded through the use of Islamic finance. The 2012 Olympics village, the Shard (the tallest building in Europe), the London Gateway, and residential developments are all examples of projects in London that have been funded by Islamic finance.

Britain recently became the first country outside the Muslim world to issue Sukuk. The £200m bond attracted healthy investor interest and was 10 times over-subscribed for orders of £2bn. This move paved the way for other Western countries to issue Sukuk bonds with Luxembourg Hong Kong following suit a few months after.

The London Stock Exchange (LSE) is now recognised as a key global venue for the issuance of Sukuk bonds with 57 sukuks issued to date with a total value of over $51bn. Looking at hard numbers Sukuk bonds provide much healthier yields than conventional banking products as they are based on real asset returns whereas the conventional banking system is currently grappling with negative interest rates.

All of the above promote a certain feel-good factor — but one must be cautious before labelling the UK as a success story for Islamic finance in the West. For all the hype there is still only one Islamic retail bank to serve the British public — and that too is not a particularly competitive entity.

I mentioned earlier that any society that upholds the values of social responsibility, good ethics and equality would be a fertile ground for Islamic finance. Yet there are estimated to be only 100,000 retail Islamic banking customers in the UK. This is pitiful for a country of 64m — 4.5pc of which are estimated to be Muslim — and begs the question as to what more can be done?

The answer is two-fold. One is a lack of understanding and the other is a lack of trust in the products.

Much work needs to be done by the industry to educate consumers in order to promote understanding of what makes a particular transaction Shariah compliant and thus more equitable and just — especially when compared to conventional banking products.

The use of the word ‘Islamic’ to describe Shariah compliant products also limits the market. Perhaps there is weight in the suggestion to refer to Islamic finance as ‘ethical’ finance to reach a broader audience.

Great care must also be taken by the practitioners to ensure that the spirit and wisdom behind Shariah compliant products is not lost when trying to cater to a wider market — if the only difference between conventional and Islamic financing is the use of Islamic terminologies for transactions that in their essence provide the same outcome as conventional banking products, then the industry will lose credibility and will find it difficult to grow.

London’s continued role as a driver for Islamic finance has also come into question post-Brexit. However in my opinion Brexit should have no impact on the growth and development of Islamic finance in the UK in the short to medium term.

A well-developed legal, regulatory and supervisory environment is what makes London particularly attractive to Islamic finance — a range of supportive government policies over the last decade have ensured that Islamic finance operates on a level playing field and since this was not governed by EU law it therefore will not be impacted by the Brexit.

If anything the Brexit may represent an opportunity for Islamic financial institutions — a weakening sterling and falling local real estate prices may provide a chance to increase current market share through residential mortgages to Middle Eastern clientele.

In the long term London’s ability to continue to be the front-runner in the West for Islamic finance will depend on its ability to retain its status as a global financial centre.

The author, a chartered accountant, holds a Master’s degree in accounting and finance. He is based in the UK.

Published in Dawn, Business & Finance weekly, November 14th, 2016