Ambitions to make Britain the western hub for Islamic finance have taken a stride forward as the sovereign Sukuk, the Islamic equivalent of a bond, was issued.
It makes the UK the first country outside the Islamic world to issue sovereign Sukuk.
The Government confirmed that £200 million of Sukuk, maturing on 22 July 2019, have been sold to investors based in the UK and in the major hubs for Islamic finance around the world.
The UK's first sovereign Sukuk received very strong demand, with orders totalling around £2.3 billion, and allocations have been made to a wide range of investors including sovereign wealth funds, central banks and domestic and international financial institutions.
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The Chancellor George Osborne said: "The issuance of Britain's first sovereign Sukuk delivers on the Government's commitment to become the western hub of Islamic finance and is part of our long term economic plan to make Britain the undisputed centre of the global financial system.
"We have seen very strong demand for the Sukuk, resulting in a price that delivers good value for money for the taxpayer.
"I hope that the success of this government issuance will encourage further private sector issuances of Sukuk in the UK."
Mr Osborne said by issuing sovereign Sukuk, the Government has demonstrated that it is possible to create a successful British base for Islamic finance.
Investors from the major centres for Islamic finance in the Middle East, Asia and Britain were all represented in the final allocation.
The profit rate on the Sukuk has been set at 2.036 per cent in line with the yield on gilts of similar maturity.
Britain's sovereign Sukuk uses the Al-Ijara structure, the most common structure for sovereign Sukuk, with rental payments on property providing the income for investors. The Sukuk is underpinned by three central Government properties.