Balls sets out reforms to boost Islamic finance

The Treasury minister Ed Balls will promise today to introduce legal reforms to make it easier for Muslims in the UK to access key financial services and to give British banks more chance of competing in the booming global Islamic finance market.

Mr Balls will announce a package of measures, to be included in this year's Finance Bill, that will overcome many of the problems faced by Muslims who live in strict accordance with the rules of sharia.

The rules bar them from paying or receiving interest, which has prevented many from obtaining traditional savings and mortgage products.

While Islamic finance products have become more widely available in Britain in recent years, savers and borrowers have run into difficulties because they often fit awkwardly with tax regulations. Some Muslim mortgage borrowers, for example, have faced higher-than-expected stamp duty and capital gains tax charges.

Mr Balls said his reforms would address many of the problems and encourage the development of the Islamic finance sector in Britain.

The reforms will include legislation to enable the launch of Islamic bonds, known as sukuk, in the UK, as well as rules to ensure that diminishing musharaka - sharia-compliant loans that are repaid in instalments - and takaful - a sharia-compliant form of insurance - are taxed in the same way as conventional products.