Transforming Dubai into a global centre for Islamic bonds

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His Highness Sheikh Mohammad Bin Rashid Al Maktoum recently launched an initiative to transform Dubai into, among other things, a global centre for Islamic bonds (sukuk).

The initiative, called “Transforming Dubai into a Global Centre for Islamic Bonds”, primarily aims at making Dubai the world capital of the sukuk market, hence potentially also transforming Dubai into the world capital of Islamic finance. According to reported statistics, Dubai’s publicly listed Sukuk market alone was valued in 2012 at around USD 10 billion, making Dubai a major player in listed sukuk issuing competing with the world leaders Malaysia and London. Regionally, the UAE leads the sukuk market followed by the main regional issuers, Saudi Arabia and Qatar respectively.

The distinguishing factors behind the success of Dubai’s sukuk industry, and Islamic finance more generally, can be attributed to various factors including economic, legal, administrative, and cultural factors. By way of an example, Dubai was the pioneer in 2010 to exempt Ijara transactions (a structure whereby title to property needs to be transferred to the bank and back to the customer) from the double payment of registration fees payable on a transfer of title; hence rendering this type of transaction more feasible, attractive, and effective. Dubai made these changes ahead of its competitors, including London where the same approach was adopted more recently…

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