Britain will launch the world's first non-Muslim government sukuk – an Islamic bond – within weeks, said Chancellor George Osborne.
The £200m (€250m, $339m) issuance will have a five year maturity. It will make payments based on rental income from government-owned properties rather than interest. Making money from interest – usury – is forbidden in Islam.
"It is with these active steps that together we are making Britain the undisputed centre of the global financial system," said Osborne in a City of London speech.
Prime Minister David Cameron had revealed that work was in progress to create a UK sovereign sukuk in a speech at the World Islamic Forum in London during October 2013, the first time the event was held outside of a Muslim state.
A UK government sukuk is a part of its effort to become a Western hub for Islamic finance. Attracting more investment from Muslims across the world is a lucrative opportunity for the UK.
Much of the large infrastructure projects in the UK, such as The Shard, have been funded by wealthy Muslims.
As well as a sukuk, the government has worked to create a banking infrastructure that is more accommodating to Islamic finance. This includes Muslim-friendly mortgages and student loans.