I was delighted to visit Leicester on 4 August for the second of my town hall tours. It was a real privilege to partner with the Muslim Council of Britain (MCB) who organised a fantastic programme and set of participants from the local area.
A large number of important issues were raised in the sequence of panel discussions which took place. These included:
The first and last of these issues are ones which will be a particular priority for the Bank over the next few years. For example, improving people’s understanding of the economy will be the focus of the Bank's Future Forum, which will take place in Liverpool on 16 November. The public ballot for tickets is now open. These and other issues are summarised in the cartoon graphics for the event above.
The issue which perhaps attracted most discussion, however, was Islamic finance. This is a rapidly growing market, with Islamic financial products now estimated to total almost £2 trillion globally. This market is also growing rapidly in the U.K., with a number of banks now offering Shari'ah-compliant financial products of various kinds.
Nonetheless, as participants at the town hall pointed out, Islamic banking is not yet a mainstream part of the UK financial services industry. Some of the major high street banks were not offering Islamic financial products and some had recently revised or withdrawn their products. Meanwhile, progress on developing other Shari’ah-compliant products, such as student loans and pension products, had been slow.
From my conversations last week, it is clear this slow progress was having real costs for parts of the Muslim community. It increased the chances of people being unbanked and reliant on cash. It increased the chances of people not having access to credit to enable them to invest - in machines, houses, their own or their kids’ education. And it restricted peoples’ choice of investment products, hindering their ability to manage their money safely and flexibly.
The Bank of England – as banker to the commercial banks – has been actively involved in supporting Islamic finance for more than a decade now. Most recently, it has been exploring means of providing banks with a Shari’ah-compliant deposit facility at the Bank, to help them meet their regulatory requirements and to manage their liquidity. The Bank outlined its preferred model of this facility earlier this year - see Shari'ah complaint facilities - and it hopes to have this facility in place during the course of next year.
This will provide some infrastructure to support Islamic banking in the U.K. But it is clear more will need to be done by the financial services industry to make Islamic banking mainstream. My visit underscored for me the importance of doing so, if the UK is to have a world-leading financial services industry which genuinely works for everyone. And the Bank will continue to work with others – in government, in financial services and in the Muslim community – to achieve that objective.
Finally, let me extend my thanks to a few people for making the visit so enjoyable and productive. First, to Nash Jaffer and Farooq Murad from the Muslim Council of Britain for their help in organising the event. I hope this is the start of a fruitful and ongoing relationship between the Bank and the MCB. Second, to Alastair Cunningham and Pam Wright, the Bank's agents in the Midlands, for their expert support and co-ordination.