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15 February 2011

The recent major leaks of US government documents by the WikiLeaks website has revealed few dramatic secrets, but it has given an insight into the regular reporting by US diplomatic missions back to headquarters.

On 4 February 2011 WikiLeaks published a cable written on 5 January 2009 by Robert Tuttle, then US ambassador in London. The cable gives a straightforward account of the growth of Islamic finance in the UK and the reasons why the British Government was supportive of Islamic finance. As it says in paragraph 2:

HM Treasury's policy objectives, released in December 2008, are to establish and maintain London as the gateway for international Islamic finance and to ensure that no person in the UK is denied access to competitively priced financial products on account of their faith.

As well as public domain information, the cable includes snippets acquired by US diplomats attending non-public but not secret events, such as round table discussions organised by the Centre for the Study of Financial Innovation. Judging by the dates, I was probably present at some of the CSFI meetings being reported on, although the cable is discreet in not naming individuals making private comments at such meetings.

I was pleasantly surprised to find myself being quoted in the cable in paragraph 9:

At separate Islamic finance events in the last months, the question was raised whether the credit crunch would have happened under an Islamic system. Experts argued that in a purely Shari'a compliant system, the financial crisis would not have occurred. Mohammed Amin, director of PricewaterhouseCooper's UK Islamic finance division, pointed out that Islamic practices based on Western products inherently could possess the same faults. However, in his opinion, some basic principles innate to Islamic finance should make a preventable difference, such as lending to only those who can afford it; using the right 'just' price instead of the market price; and following standards against complicated contracts and speculative activity.

The only significant error I can see in the cable is in paragraph 3:

The UK now has the only stand-alone Islamic financial institution in the EU, the Islamic Bank of Britain.

At the time the cable was written, the UK was home to five stand-alone Islamic banks and one stand-alone Islamic insurance company! The error is out of character with the generally accurate reporting in the rest of the cable which reports the Islamic finance scene in the UK and its drivers of growth pretty well.