UK export credit agency to guarantee sukuk bond for first time

LONDON, Oct 28 (Reuters) - Britain's export credit agency will guarantee a sukuk bond for the first time next year, the finance ministry said on Tuesday, as it seeks to boost London's position as a centre for Islamic finance.

UK Export Finance (UKEF) expects to guarantee an Islamic bond next year issued by a customer of European plane maker Airbus, the finance ministry said.

It added that it would be the first sukuk for an aviation deal to be backed by an export credit agency, and like conventional guarantees, it will be available for use in a range of currencies.

Four months ago, Britain became the first Western government to sell an Islamic bond, attracting bids worth more than 10 times the 200 million pounds ($322 million) on offer.

The Treasury expects that the pricing of the UKEF-guaranteed sukuk for the Airbus customer will be consistent with a conventional capital markets product.

"Our ambition is that this sukuk product will be rolled out to a range of other customers and sectors," said Andrea Leadsom, a junior British Treasury minister, speaking in Dubai.

Issuers of Islamic bonds say they operate in compliance with sharia, or Islamic law. A ban on charging interest and investing in prohibited industries such as alcohol, pornography and gambling, are among features that distinguish it from conventional finance.

(1 US dollar = 0.6205 British pound) (Reporting by Andy Bruce; editing by Ralph Boulton)