The Islamic capital market development strategy, being implemented by the Securities and Commodities Authority (SCA), is set to strengthen Dubai’s position as a global reference for Islamic economy among the world’s decision-makers and specialists, and further promote its advocacy for sustainable growth of the national economy.
This strategy will stimulate the Islamic capital market and enhance the flow of investments directed towards ethical opportunities within the Islamic economy. In formulating the strategy, new legislations need to be issued, in addition to amending existing ones, such as the regulations associated with Sharia-compliant investment funds.
Furthermore, the current disclosure system will need to be supplemented with greater transparency of Islamic products, as well as with specific regulations to streamline Sharia-compliant hedge funds and sukuk. The establishment of an Islamic capital market in the country that complies with the latest international practices will lead to the creation of Sharia-compliant products, services and market mechanisms that attract investment, contribute to the development of the securities sector, and ultimately grow the economy.
Following this important step by SCA, financial markets in the UAE will be able to list and trade Sharia-compliant securities and contracts in coordination with the Authority, as well as modernise trade, carry out formalised transactions with manufacturers of Islamic products, and develop investment indicators for Islamic securities.
The Islamic economy is gaining momentum with each passing day, as is evident in the increase in its contribution to Dubai’s GDP from 7.6 per cent in 2014 to 8.3 per cent in 2016, a growth rate of 14 per cent. In 2016, Islamic economy sectors contributed Dh32.77 billion compared to Dh32.21 billion in 2015 and Dh28.78 billion in 2014.
This growth is a qualitative advancement for the development of Islamic economy in Dubai. In addition, it underscores the success of the UAE’s sustainable development drive as part of its post-oil economy vision and its keenness to boost productive sectors and develop strategies that encourage responsible investment, entrepreneurship and innovation.
The efforts of SCA to revitalise the Islamic capital market will boost local and international confidence in both Dubai and the UAE, confirming the potential for further progress for the Islamic economy and of the wider national economy. The heightened confidence of producers and consumers will enhance the sector’s ability to attract more capital from those seeking secure investments.
Following the global financial crisis of 2008 and the challenges that emerged in its aftermath, investors and markets around the world articulated the urgent need for a fair and secure economic system, which is why the Islamic economy has been gaining international uptake with each passing day. A more equitable and transparent economic system assures balance in wealth distribution, and contributes to the overall objective of long-term development, which aligns with the principles and values of the Islamic economy.
The development of the Islamic capital market with Sharia-compliant financial products and investment tools will enhance the concept of responsible investment that is the foundation of a sustainable economy. The success indicator of any investment will soon be its contribution to social development, as outlined in United Nations’ Sustainable Development Goals and as desired and agreed to by the world’s peoples.
(Abdullah Mohammad Al Awar is CEO of Dubai Islamic Economy Development Centre. The Global Islamic Economy Summit 2018 opens October 30 in Dubai.)