Chancellor to announce decision on 'Sharia bonds'

Chancellor Alistair Darling is expected to announce in his March 12 Budget if the Treasury will go ahead with plans for so-called "Sharia bonds" to lure money from the cash-rich Middle East.

Last April the Treasury announced it was interested in exploring the possibility of borrowing funds via Islamic law-compliant bonds known as sukuk.

A three-month consultation exercise on the issue ends on Thursday.

A Treasury spokesman said it had been looking into whether the bonds would be practical and MPs expect to be updated on progress in the Budget.

Islamic law forbids making money from interest but specially-designed bonds have been designed to comply with Sharia.

Sukuk is now estimated to be worth £5.5 billion in a £125 billion global Islamic financial market.

Announcing the study last spring the Government said: "The Islamic finance market is growing globally year on year, and we want London to play a key role in this area. We will do everything we can to promote new ways for British Muslims to bank, save and borrow."

The Treasury spokesman added: "We want the City of London to be one of the gateways globally for Islamic financial products and we want it to be competitive on all products you can imagine, so we should be competitive on Islamic finance as well as any other.

"Just because of your faith, there shouldn't be any issue about your access to financial services in the UK."

© Independent Television News Limited 2008. All rights reserved.