Dubai has an evolving vision for Islamic finance

In January 2013, Sheikh Mohammed bin Rashid Al Maktoum unveiled his initiative for Dubai to become the global capital of the Islamic economy, a multi-trillion-dollar industry. Dubai is no stranger to setting high goals and delivering results.

The ruler's vision is underpinned by wide-ranging measures. These are aimed at gaining significant market share of several global halal industries including halal food, travel, education, pharmaceuticals and cosmetics. As part of the impressive strategy, Dubai intends to be at the very centre of global Islamic banking and finance. Indeed, prior to Sheikh Al Maktoum’s announcement, Dubai had already established itself as a destination with a convincing and ever-growing reputation in Islamic finance.

Big things can happen in Dubai. In 1975 the emirate established the world's first Islamic bank, called the Dubai Islamic Bank, which is still the largest of its kind. Tackling complex structured financing arrangements with relative ease is one of Dubai's fortes.

Sheikh Al Maktoum’s vision is backed by a three-year strategy. What is significant is the diversity of the steps that underlie this: The new Dubai Islamic Economy Development Centre (DIEDC) is at the heart of all of this. Its objectives are to promote Dubai regionally and globally as a main centre for sharia-compliant goods, and financial and non-financial services, build a database on Islamic economic activities and encourage recourse to arbitration in relation to Islamic economic activity disputes. In a recent report the DIEDC highlighted that the development of an Islamic economy has to yield to common standards and structures. For Islamic finance, this means common sharia interpretations and contract templates for banking, capital markets and asset management are essential to facilitate higher levels of cross-border flows.

In March 2014 the Dubai government announced its plan to set up a sharia-compliant export-import (EXIM) bank – the world's first. The bank is to provide a full range of products and services aimed to support flows in and out of the UAE. The bank will also assist businesses in the UAE to grow their trade flows by providing risk mitigation, financing and market access. It is to be mandated to deal directly with international organisations and other EXIM banks globally.

There is also the new Dubai Centre for Islamic Banking and Finance, established by the ruler’s son, Crown Prince of Dubai Sheikh Hamdan. Its purpose is to offer academic programmes and training, including Islamic finance, in three core areas to develop the Islamic economy, namely human capital, research and community service. It has already set its sights globally and aims to build bridges with other overseas academic institutions such as the renowned Paris Dauphine University.

In April 2014 the Dubai Financial Market (DFM) published a standard for issuing, acquiring and trading sukuk. The DFM is an established secondary market trading several types of financial instruments. Sukuk of course is a runaway success story, perhaps being the Islamic financial instrument with the highest international profile. The purpose of the DFM standard is to consolidate and standardise the listing of sukuk on its exchange. At the same time, the standard aims to ensure that such sukuk meet a certain sharia-compliant threshold to achieve consistency and quality control.

In October 2014 Dubai hosted the 10th World Islamic Economic Forum, one the largest of its kind, held over three days and bringing together people, ideas and businesses across the breadth of Islamic economic activity. The forum acted as a great way for Dubai to engage with the global Islamic finance community.

What distinguishes Dubai from other financial centres striving to dominate in Islamic banking is that the breadth of its goals is greater. It understands that Islamic trade and finance are inextricably linked; strive to be at the centre of one and you will get the other.

The right components are there – clear vision, a wealth of experienced individuals and organisations, and a steely determination.

These are interesting times for Dubai’s development.