The UK is known as the first Western country to become a center for the development of sharia finance since the late 1970s. This journey began in 1982 when Dar Al-Mal Al-Islami from Geneva opened an office in London, followed by the granting of an operating license to Bank Al-Baraka by the Bank of England in 1983. These two institutions became pioneers in providing Islamic-based financial services within the dominant conventional financial system in Europe.
Since then, the growth of Islamic finance in the UK has continued to show progress. Various Islamic financial institutions have emerged, offering services in line with Islamic principles, such as interest-free banking, profit-sharing schemes, and halal insurance (takaful). The presence of these institutions is not merely supplementary but also contributes to expanding the range of ethical and inclusive financial services in the UK.
A survey conducted by the 2Europe institute revealed that the British public holds a positive view of the Islamic financial system. The majority of respondents understand basic principles such as profit-sharing and consider the system relevant and inclusive for people of all faiths. This high level of acceptance is an important social capital for driving the broader growth of Islamic finance.
Globally, the UK also shows outstanding performance. In the 2016 ICD and Thomson Reuters report, the UK ranked 22nd as the country with the best Islamic finance development in the world, the highest among non-Muslim countries. The UK has six active Islamic banks and 16 conventional banks offering Islamic-based financial products. Additionally, the UK successfully issued the first sovereign sukuk outside the Islamic world, with very high market demand.
The takaful sector has also seen significant growth, particularly following the launch of the first Islamic insurance product in the London Lloyd's market through a collaboration between XL Group and Cobalt Underwriting. This step demonstrates that Sharia principles can be applied even in the highly competitive and complex global insurance market.
Although Sharia-compliant financial services primarily serve the institutional and global investment sectors, future trends indicate a shift toward the domestic retail sector. Some major banks in the UK are beginning to expand into Sharia-based services, opening new opportunities to reach local Muslim communities with more equitable and inclusive access to services.
With a combination of policy support, public acceptance, and industry readiness, the UK has the potential to continue leading as a Sharia financial hub in the West. The expansion of Sharia banking, strengthening of the takaful sector, and improvements in Sharia literacy and investment are strategic steps to sustainably strengthen the Sharia economic ecosystem.
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