David Cameron has announced plans to issue a Shariah law bond in the United Kingdom, making it the first non-Muslim country to do so.
But Bishop Michael Nazir-Ali warns against the move, saying dabbling with Shariah law could lead to “unforeseen consequences” for the government.
The prime minister set out proposals to issue the £200 million ($322 million) bond at the World Islamic Economic Forum last week.
To comply with Shariah law, the bond is a form of debt that charges no interest.
Cameron also announced plans for a new Islamic index on the London Stock Exchange.
He said, “I don’t just want London to be a great capital of Islamic finance in the Western world. I want London to stand alongside Dubai as one of the great capitals of Islamic finance anywhere in the world.”
Bishop Nazir-Ali raised concerns about the effects of the proposals, saying, “This means that the government itself will be subject to Shariah in its dealings on these bonds.”
He added, “At the moment the issue is pretty modest, but how much will it grow?”
The bishop says it may lead to a situation where a “major part” of the financial system is governed by “Shariah-compliant considerations.”
The treasury is expected to launch the bond next year and will bring in a fixed return from a tangible asset or service without charging interest.