The Scottish Islamic Foundation (SIF), Scotland's primary Islamist pressure group, was forced this week to return £128,000 of public money.

The Government has launched a consultation on the legal implications of regulating Islamic finance in the UK.

The joint Treasury – Financial Services Authority (FAS) consultation will set out the proposed legislative framework for regulation of an alternative financial instrument commonly known as an Islamic bond, or sukuk, which is interest-free and asset-backed.

Islamic, or sharia-compliant, finance could benefit from the UK's current economic downturn, according to financial consultants BDO Stoy Hayward. The principles that underpin Islamic finance will make it more attractive to potential investors as banks are increasingly being forced to make cutbacks.

Islamic finance commonly operates on a risk-sharing model and prohibits usury. As a result more money is available to borrowers and the amount of money owed at any one time is lower than many mainstream lenders.