UAE Key Player In Islamic Finance

The U.A.E. emerges as a key player in Islamic finance, with total Islamic banking assets of US$95 billion in 2013 compared to $83 billion in 2012 and this momentum will continue with U.A.E. Islamic banking assets forecast to grow at a compound annual growth rate, or CAGR, of 17 percent until 2018.

Fuelled by booming industries in the Middle East and Southeast Asia, the Islamic finance industry is growing fast. Forecasts estimate it will double over the next five years to more than $3.4 trillion. The two global centres for Islamic finance are currently Malaysia and the U.A.E.

The global sukuk industry is expected to be one of the fastest growing segments of the Islamic finance industry with huge growth potential in the GCC region, particularly in Dubai where sukuks are expected to play an important role over the next decade in securing funds for the substantial line-up of new projects, a report by the Dubai Chamber of Commerce and Industry says.

Dubai is one of the most important platforms for trading Sharia-compliant financial products. By the end of the first half of 2014, the total value of sukuk listed on Dubai's exchanges was close to $22 billion, out of this Nasdaq Dubai alone accounted for more than $18 billion. Currently Dubai is the world's third-largest venue for sukuk listings by value. The Islamic Development Bank has set up a $10 billion sukuk issuance programme on the Nasdaq Dubai exchange that will be a big boost to Dubai's efforts to become a top centre for Islamic finance. London, which is already a global financial centre, is making its moves to bolster Islamic finance from education to cultivating relationships with Muslim banks and investors. The Dubai Chamber research note highlights the sukuk market as one of the most attractive areas of Islamic finance that has attracted considerable interest from the business community worldwide.

While the GCC and Malaysia have emerged as the main hubs for sukuk issuance, the main issuers of the sukuk in the global market are sovereigns, followed by corporates and government-related enterprises. Countries such as Tunisia, Mauritania, Senegal and Oman are set to be key markets for sukuks.

However, sukuk issuance is not limited to Islamic countries. In 2014, a number of high-profile debut sovereign issuances are expected to take place in countries such as the U.K., Ireland, and South Africa.

It is further anticipated that sovereign issuances by the U.K. are likely to spur interest in Europe for sovereign Sukuks as they provide access to the growing Islamic liquidity pool.

The U.K., which announced its maiden sovereign sukuk issue at the ninth WIEF in London last year, has already completed the issue earlier this year. With so much activity in the sukuk market, development and implementation of laws and regulations for the issuance of Sukuks has been introduced by a number of countries, including those in North Africa, PricewaterhouseCoopers observes.

According to the Dubai Chamber research note, global financial assets are dominated by Islamic banking assets, which accounted for about 80 percent of the total assets in 2013 while sukuks made up just 15 percent of the market.

The report further notes that despite the huge potential for growth and the increased diversity of sukuk products, the market not only requires more instruments but existing ones need to be refined as some Sukuk structures are yet to gain wider acceptance.

Emirate:  Dubai

Date: Oct 8, 2014

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