Mr Balls said the government would introduce new measures to boost the Islamic banking sector, including new laws to facilitate the issuance and trading of Islamic bonds, also known as Sukuk.
He also said that the British government plans to harmonize tax treatment of some Islamic financial instruments with conventional financial products by the summer legislative recess, which typically starts in June or July.
"We are currently looking at the how the tax system interacts with the Sukuk market - what barriers there are to establishing a secondary market in the UK; what barriers in the way of UK issuance and how UK holders are taxed," Mr Balls said.
"I can announce today our intention to set out in the Budget what a tax framework for sukuk will look like and what the consequences would be for any London market."
It is estimated that the sukuk market is worth over $40 billion and is now starting to attract non-Muslim investors.
The British Economic Secretary also said that the new measures will clarify how standard insurance rules will apply to Shariah compliant insurance, known as takaful, in order to remove barriers to market development.
He also said he would ensure that tax and regulatory systems encourage the development of Shariah compliant products.
Mr Balls said Islamic finance is one of the top priorities of the Chancellor of the Exchequer's High Level Group.
"As Islamic finance grows in importance, we want to see more of this business coming to the UK. There are currently in the region of £250 billion of funds within the Islamic finance system, growing at around 15 percent annually,
"And there are encouraging signs that London is playing a growing role in these fast growing markets," he said.
Since 2003, the Islamic mortgage market in the UK has grown to over $970 million, the Economic Secretary added.
Islamic banking is flourishing worldwide, even in Western states, as banks try to tap into the booming Islamic finance market, tailoring products for consumers who follow the Islamic Shariah law, which bans Muslims from giving or receiving interests.
Shariah law also bans Riba, or usury, as well as investing money in industries related to alcohol, tobacco, gambling or pork.
According to Britain's Financial Services Authority, assets held in Shariah-compliant accounts worldwide total $200 billion to $500 billion and growing at 10 percent to 15 percent a year.
Many international banks are now trying to build on the success achieved by the Islamic banking in mostly Muslim countries like Malaysia and Turkey, as well as European countries that have large Muslim Communities.
It's worth mentioning that Islamic banking system is relatively low in the United States. However, regulators say they are trying to accommodate increasing activity.
Güncelleme Tarihi: 20 Eylül 2018, 18:16