There is a danger that the Islamic finance and banking industry could just muddle along, only doing business with itself and neglecting the rest of the financial market. This is already true in some geographic markets more than others, but the UAE is probably at the forefront of countries trying to ensure that the ‘brand’ of Islamic finance doesn’t become too introverted and spend too much time navel gazing.
As home to the world’s first Islamic bank, Dubai Islamic Bank, the UAE has had a pioneering role in the development of Islamic finance since 1975. Hardly surprising that the UAE is now home to a range of Islamic banks including Abu Dhabi Islamic Bank, Noor Islamic Bank, Al Hilal Bank, Ajman Bank, Emirates Islamic Bank and Sharjah Islamic Bank. It is also home to one of the greatest living Islamic finance scholars, Dr. Hussain Hamed Hussan who sits on the Shari’ah boards of countless Islamic finance houses. He is also the mainstay behind one of the globe’s leading Shari’ah consultancies, Dar Al Sharia, which is part of the Dubai Islamic Bank group.
The UAE is also headquarters for a number of Shari’ah compliant windows within conventional banks including RAK Bank’s Amal, Mashreq’s Al Islami, ADCB Islamic Banking and NBAD’s ADNIF.
During boom times, there were also Islamic home financing companies supplementing the banks in the form of Amlak and Tamweel. Shares in Amlak and Tamweel were suspended in November 2008 following on onset of the global downturn as the business model they employed left them open to the worst effects of the property collapse. There was strong suggestions that these two firms would merge, dating back to 2008, but that never came to pass. Instead Dubai Islamic Bank, 30 per cent-owned by Dubai’s ruler Sheikh Mohammed bin Rashid Al Maktoum's Investment Corp of Dubai, merged Tamweel’s operations into the bank a few months ago. Dr. Adnan Chilwan, CEO of DIB said, "This move is a key milestone in bringing us closer towards the culmination of our strategy for Tamweel."
What this begins to hint at is the depth and breadth of commitment that the UAE, and Dubai in particular, has for all things Islamic. It is hard to miss the overarching strategy behind these concerted moves, but if it was not obvious before then it all became clear in January of this year when Dubai officials unveiled the ruler’s vision for the emirate as the ‘global capital’ of the Islamic economy. The strategy is a complex one but it involves establishing a Shari’ah council to oversee standards in Islamic finance, an arbitration centre to resolve disputes in Islamic contracts and a drive to boost production of halal food in Dubai. Sami Al Qamzi, director general of the Department of Economic Development in Dubai, said the aim of the initiative was to create “a global capital of Islamic industry, economy and finance” in Dubai.
To be clear, this means more than simply pushing Islamic finance, although S&P has said it expects the Islamic finance industry alone to be worth about $2.6tn by 2015. Trade of halal food and products is expected to grow rapidly to $8.4bn in 2020, according to government estimates.
Much has happened since the launch of this initiative and in recent weeks Dubai has set out on its three-year journey to make itself the hub of the Islamic economy, announcing 46 separate initiatives. The seven pillars of this strategy are based upon solid foundations: finance; the halal food industry; family friendly tourism; digital economy; fashion, arts and design; economic education; and standards and certification. At the launch of the initiative Sheikh Mohammed said, “The continued developments and changes in the global economy increase the need to constantly diversify the structure of our national economy. Our aim, from all economic initiatives we launch, is to improve the quality of life and provide opportunities that ensure a prosperous future for coming generations.”
Practical steps towards fast tracking this initiative include the establishment of an Islamic Governance Centre to develop standards of corporate governance in the Islamic business world with an international laboratory for the certification and accreditation of halal products planned for early 2014. Subsequent developments will include legislation to regulate the production of halal products locally and an international endowment authority to spread the culture of Awqaf, or charitable endowments. Whether the other emirates will allow Dubai’s ambitions to proceed unchallenged with no competition remains to be seen.