City firms can expect more capital markets work following an ‘extraordinary’ month of activity involving Islamic finance, experts said this week.

Earlier this year the UK became the first country outside the Islamic world to issue sovereign sukuk, the Islamic equivalent of a bond.

Farmida Bi, head of Islamic finance (Europe) at Norton Rose Fulbright, which advised Goldman Sachs on the issue of its first sukuk, said: ‘September has been an extraordinary month for sukuk activity, with issues from Hong Kong, South Africa, Goldman Sachs and Luxembourg. What all these deals have shown is that there is a demand from Islamic investors for highly rated sukuk issues by non-Islamic issuers.’

Britain’s sovereign sukuk uses the ijara structure – the most common structure for sovereign sukuk – with rents on property providing income for investors.

Goldman Sachs’ $500m sukuk is based on a wakala structure, with the underlying assets linked to commodities. The wakala structure, Bi said, ‘could be replicated by other institutions and corporates who may not have appropriate assets that they could use for an ijara transaction’.

With sukuk becoming an attractive instrument for capital markets issuers across the globe, ‘this should lead to a lot more work for capital markets lawyers in the City since London is the global financing hub for all kinds of financing structures’, Bi said.

Islamic finance specialist Imam Qazi, a partner at south-west firm Foot Anstey, said sukuk-related activity would help establish London as the global gateway for international Islamic finance. 

‘Our Islamic finance team has witnessed a marked increase in the availability of Islamic debt for real estate transactions over the last six months, with a trend in favour of residential developments in central London,’ he said.