Dubai: The Dubai Financial Market (DFM) is planning to launch an Islamic index in the near future, Dr. Mabid Ali Al Jarhi, Secretary General of Fatwa and Sharia supervision board at the DFM, told Gulf News yesterday.
Speaking on the sidelines of a sukuk workshop organised by the Dubai Economic Council, Al Jarhi said: "In the coming three months, DFM will unveil a new index for share trading that complies with Islamic legislations."
He said that DFM has done a lot of research on most of the international benchmarks to come up with a new market index that lists stocks adhering to Sharia.
"DFM is working to set up the technical body which would launch this new index in the market."
Al Jarhi added that setting up an Islamic index on the DFM will create a dynamic mechanism for raising capital.
The new index will create more flexibility in the financial market by giving investors options to choose between Islamic or conventional shares. The index will be set up based the Sharia compliance of companies.
Al Jarhi said the Fatwa and Sharia Supervisory Board of the DFM is proposing a new index for sukuk trading and the market activities will be governed by the Islamic legislation.
"All sukuk issuance in the market would be included in this index," he added. "It is a step towards setting up the concept of the Islamic finance market in the DFM."
However, he said the slowdown in sukuk trading is because there is not enough sukuk to be issued. Demand exceeds availability and sukuk buyers prefer to hold on to their investments.
Al Jarhi said the DFM initiative will go a long way to create a vibrant secondary market for sukuk. With the creation of an active secondary market, he expects that the UAE could beat London, Bahrain and Malaysia and be the centre of international Islamic finance.
Dr Abdul Azeem Abu Zayed, Adviser at Emirates Islamic Bank, called for the need of Hawkama of sukuk issuance and the importance of uniform legislation that complies with Islamic principles to protect sukuk issuance.
"There should be a committee to control the fatwa and Sharia supervisory bodies and authorise the mechanism of the Islamic products."
"We aim to improve this Islamic financial industry and to penetrate the west with a strong solid base," he said.
Hani Al Hameli, Secretary General of the Dubai Economic Council, said: "Sukuk is one of the most important tools of Islamic finance not only in the Islamic country but world wide.
"Since it was launched, the size of sukuk trading grew from less than $1 billion in 2002 to $94 billion [Dh345.7 billion] in 2007. The UAE ranked number one in sukuk trading with $33 billion in 2007," he said.