Omar Shaikh: Islamic ethical finance offers country tempting opportunities

In contrast, Islamic and faith-based financial systems, which prohibit investments that are harmful to society, have continually been shown to be an attractive and viable alternative.

Despite the slump, limited liquidity and huge de-leveraging, Islamic finance is growing at 25 per cent a year. None of the Islamic banks were hit by the subprime crisis and, favouring asset-backed financing and equity financing structures, are arguably better placed in the real economy.

Islamic finance not only presents high-growth commercial potential, providing access to alternative forms of liquidity, it also offers a values-based alternative to the "greed driven" banking paradigm of recent years, an attitude that has adversely affected all too many stakeholders in the recent financial crisis.

Not only the UK but also various other national governments have publicly stated their ambition to become a gateway to Islamic funds. The attraction of these funds to finance big infrastructure projects is well documented and Scotland's proud heritage in faith-based finance makes the country well-placed to embrace the practices and theories of Islamic finance. But are we now being left behind?

Across Europe, a German state has issued an Islamic sovereign bond and the French government has established its Islamic finance working group, signalling its clear intent to enter this market and access the large pool of liquidity within the Gulf region through Islamic finance.

Tomorrow, the Islamic Finance Council UK and law firm Tods Murray hosts the second Islamic and Ethical Finance Conference in Scotland.

It is a propitious time to be holding an event that looks at all aspects of the moral economy as this year sees the 200th anniversary of the foundation of the world's first commercial savings bank, the Trustee Savings Bank, by the Rev Henry Duncan, "the father of savings banks".

Whatever your faith, we can all recognise the major challenges facing the world. Balancing economic growth to counter global poverty, while preserving our fragile planet, requires new thinking, coupled with practical, collaborative and immediate action, championed by those with boldness and energy.

One of the ways to highlight what people have in common is to encourage tolerance and understanding based on a mutual respect and to remind people of the many principles shared by the great religious traditions which are often obscured or discarded in the modern age.

Islamic finance and ethics in financial and business dealing share in these crucial principles. Honesty, integrity, transparency and contentment are some of the key concepts underlying the Islamic economic philosophy.

While we can bring like minds together, however, it is clear political will is a key determinant for success in this market and across Europe, the Middle East and Asia governments are actively engaging in Islamic finance.

For Scotland to also tap into this market, the Scottish Government will need to be more proactive and apply focused, timely and material resources to capture the economic development opportunities Islamic ethical finance presents, particularly in these challenging times of recession. The positive engagement from a few MSPs now needs to be converted into concrete and meaningful commitment from the Scottish Government as a whole or Scotland risks losing the current window of opportunity.

If the UK government Germany, France, Luxembourg, Singapore and Australia are getting involved at the highest political levels, then why can't Scotland, which is arguably better positioned with its heritage in ethical, mutual and faith-based finance?

For example, the proposal for an "Islamic finance house" designed as a conduit for Islamic funds has received widespread support and presents an ideal opportunity for the Scottish Government to take the initiative.

Omar Shaikh is an executive board member of the Islamic Finance Council UK. The Islamic & Ethical Finance Conference takes place tomorrow at the Edinburgh office of law firm Tods Murray.