The lord mayor, who is elected for a one-year term and who is mandated with promoting UK-based financial services across the world, reminded his guests that London has been providing Islamic financial services for over three decades and the range now on offer reflected the worldwide growth in demand. The UK, he added, is the leading European center of Islamic finance and the city expects demand for Islamic financial products to increase significantly over the coming years.

UKIFS in reality is the product of the merger of the Islamic Finance Sub Group (IFSG) of the UK Trade and Investment (UKTI), the UK government entity that supports companies trading internationally and overseas enterprises seeking to locate in Britain; the various components of the Sub Group which include the banking, accounting and ETQ (education, training and qualifications) groups; and the Islamic Finance Experts Group (IFEG) at the HM Treasury which was disbanded by Exchequer Secretary to the Treasury Sarah McCarthy-Fry at its last meeting in January.

While the UKTI has agreed to fund UKIFS for one year and the Chartered Institute for Securities & Investments (CISI) is providing the interim administration, UKIFS has effectively become the privatized legacy of the IFSG and IFEG. From 2011 it will have to survive on its own through its own membership and revenues. In a post credit crunch and financial crisis climate, in which resources are scarce, UKIFS will find the going tough unless it can demonstrate almost immediately that it has the capacity and the ability to give members added value in terms of a nascent trade body and the resources to effect this.

Trade bodies in the Islamic finance space have hitherto largely been ineffectual save perhaps the ones in Malaysia such as AIBIM (Association of Islamic Banking Institutions of Malaysia) and IBFIM (Islamic Banking & Finance Institute of Malaysia); and in Turkey where the Association of Participation Banks is very proactive. AIBIM, for instance has issued a number of master agreements such as Wakala and Murabaha to which all members have signed up to. The Association of Participation Banks in Turkey, on the other hand, is managing the Islamic deposit insurance scheme for the Participation Banks in Turkey, which together with Malaysia are the only countries to have such schemes in place. Both the Malaysian and Turkish bodies are statutory trade bodies of which all Islamic banks authorized in these countries must become members.

The UKTI's IFSG and IFEG, while they did contribute to the development of Islamic finance in the UK, were not really up to the task and were ineffectual in realizing the potential role they could have played partly because their roles were not thought out properly.

The IFSG's fit with the UKTI was not appropriate because the latter being a promotional body could not assume the task of advising on policy. The IFEG on the other hand was rushed through by HM Treasury which resulted in a motley of members and was characterized by those eminently qualified people who were not invited to be members.

The UKTI, according to some market players, is also a very bureaucratic organization, which meant that progress on initiatives was frustratingly slow.

Richard Thomas, CEO of Gatehouse Bank and a prime mover behind the IFSG and UKIFS, is in no doubt that the UK has a unique opportunity in the West to benefit from the global growth of Islamic finance. "We have a favorable regulatory framework after unfair taxes were repealed and equal tax relief was extended to certain Islamic financial products - and the UK has a breadth and depth of sector expertise that is unrivalled in Western Europe. This business environment, combined with expected global growth rates of 15 to 20 percent each year, could make Islamic finance a golden goose for the financial services industry in the next few years. What's more, UK growth rates could be greater still as we see a trend for non-Muslim customers and Western companies to consider Islamic finance as an alternative to higher-risk finance," he explained at the launch of UKIFS.

Thomas, who has worked in the Islamic finance industry for over 25 years, is too aware that this is an opportunity that the UK market cannot afford to waste. He is confident that UKIFS will help the industry grow and create a level playing field for Islamic finance products.

The Labour government over the last decade has pioneered enabling legislation ensuring tax neutrality for equivalent Islamic financial products under its financial inclusion policy. The Bank of England, especially under the then Gov. Eddie George, the Treasury, The Financial Services Authority and HMRC have all played a key role in the above process.

However, despite the fact that the UK has five authorized banks, which operate entirely under Shariah principles, their progress has been at best piecemeal. Over the last two years, for various reasons, business has been slow and unspectacular. A number of the banks reported losses and 2010, according to one Islamic banker in the UK, will continue to be tough. Many of the Islamic finance windows have also wound down their business activities. Market awareness and education of Islamic financial products is the main challenge.

And yet this is not a core objective of UKIFS. Its main aims are "to coordinate and promote alternative (Islamic) finance in the UK"; "to act as a primary contact point for UK government bodies including Treasury, the FSA and UKTI"; and "to help establish the UK as a gateway to international Islamic finance."

The acid test for UKIFS in the coming years is whether it can muster enough resources to finance its activities to meet the above objectives and whether the wider Islamic finance community - both market players and corporate customers and other interested parties - are prepared to put their money and time where their mouths are.

If not, UKIFS will become yet another run-of-the mill mutual admiration initiative, meeting occasionally behind closed doors, and missing the opportunity completely.