The British government is issuing Islamic sukuk (bonds) to raise £200m, The bond issue is the first by a Western country and is part of a bid to make Britain the hub for Islamic finance.

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A sukuk is an Islamic investment structured in accordance with the principles of sharia. It represents equity, not a loan, with the income due from the issuer to the sukuk certificate holders.

Buyers will earn rental income in lieu of interest from three Government offices and the money will be repaid in five years.

The sukuk is being handled for the UK Treasury by a syndicate of banks led by HSBC.

Guides to Islamic finance