LONDON, Jan 31: Economic Secretary Ed Balls set out new measures to establish the UK as the financial partner of choice for emerging markets and a leading global centre for Islamic finance.

In his speech to the Euromoney annual Islamic Finance summit on Tuesday Ed Balls argued that the government had a role in helping industry overcome barriers to the development of Islamic finance in the UK.

In order to support the development of Islamic financial products, the government on Tuesday announced measures which include legislation in Finance Bill 2007 to facilitate the UK issuance and trading of Sukuk; guidance on Diminishing Musharka and Takaful to be published alongside the budget; and Islamic finance will become a key priority of the work of the chancellor's high-level group.

The government also welcomed industry developments, including a memorandum of understanding signed on Tuesday between the International Capital Markets Association and the International Islamic Financial Market to set standards for Islamic capital markets; and the launch of the Islamic finance qualification in October, a joint initiative between the Securities and Investment Institute, and the Ecole Superieure des Affaires, one of the leading business schools in the Middle East, to develop qualifications in Islamic finance.

Ed Balls said, "Today I am able to set out the next stage in our reforms to ensure the tax and regulatory system will encourage the development of Shariah compliant products. I am pleased to be able to outline these reforms alongside the announcement of a memorandum of understanding to help set standards for Islamic capital markets. Today is an example of public and private sectors working together to fulfil our shared ambition of creating major international markets in Islamic finance with London as their centre."

The summit was attended by city professionals and government officials from around the world.

The government and industry are working to develop Islamic products that are economically equivalent to conventional products but do not involve the receipt or payment of interest. These include: Sukuk — the Islamic equivalent of conventional securitisations; Diminishing Musharaka - the Islamic equivalent of a loan repaid in instalments; and Takaful - a Shariah compliant form of insurance.

Islamic finance will be a discussion topic when the chancellor's high-level group next meets in May. The group will discuss ways to promote the UK as a centre for Islamic finance and how to improve skills in Islamic finance in the context of the new proposed centre for regulatory expertise.

The group consists of senior representatives from across the financial sector and met for the first time at 11 Downing Street on the October 18 2006.

The International Capital Markets Association (ICMA) is an industry representative body that provides a forum for policy development and dialogue with regulators (government). It was set up in 2002 to promote and develop global cross-border market trading of Islamic financial products and act as a centre for Shariah endorsement of these products. It was jointly founded by the central banks of Bahrain, Brunei, Indonesia, Malaysia, Sudan and the Islamic Development Bank based in Saudi Arabia, and is headquartered in Bahrain.