DIEDC announces new five-year plan for the Islamic economy in Dubai

The Dubai Islamic Economy Development Centre (DIEDC) has launched a refreshed strategy for 2017 to 2021 under the directives of HH Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai, Chairman of Dubai Executive Council and General Supervisor of the Dubai: Capital of Islamic Economy initiative.

HH Sheikh Hamdan said: “The new strategy uses a two-pronged approach. The first part concentrates on the development of the Islamic economy system and includes identifying new key performance indicators (KPIs) for monitoring the growth of important sectors and measuring their contribution to the national economy. The second component includes enhancing Dubai’s status as a global reference for Islamic finance, industry, trading standards and culture, and as a prime destination for halal trade and family tourism.”

HH Sheikh Hamdan said the Islamic economy continues to be relevant today. “Contrary to what some may think, Islamic economy does not belong to the past – rather, it is firmly rooted in the present and the future. Achieving progress is meaningless without sustainability, financial security and economic stability. Most young people today, especially in the UAE, no longer revel in material excesses. Instead, they enjoy applying creativity and innovation in producing real tools for development,” he said.

“For a strategy to truly succeed, it should first and foremost equip people with the skills needed for its implementation. It is crucial to empower young talent with the latest advancements in knowledge and technology as well as with the ethical foundations that Islamic economy incorporates. The success of our efforts will depend on our creativity in developing the ethical framework of the Islamic ecosystem.

“When HH Sheikh Mohammed bin Rashid Al Maktoum, VP and PM of the UAE and ruler of Dubai, launched the Dubai: Capital of Islamic Economy initiative in 2013, he did not aim to make a quantitative addition to current global economies. His vision was to establish an ecosystem that can inspire next generations looking to build a more prosperous future. Today, our youth have the means to make this goal a reality.”

Reinforcing the momentum established by the Dubai: Capital of Islamic Economy initiative, the refreshed strategy focuses on ensuring long-term impact. Its main objective is to lead the growth of the Islamic economy sectors on a local, regional and international scale, and to set a benchmark for the Islamic ecosystem worldwide.

At the heart of the refreshed strategy are three key pillars – Islamic finance, the halal sector, and Islamic lifestyle, which includes culture, art, fashion and family tourism. Knowledge, standards and digital Islamic economy serve as cornerstones in supporting the pillars while playing a pivotal role in shaping an enabling environment for sustainable investments and real development.

Highlighting the importance of the updated Islamic economy strategy, Al Mansouri stressed that the Islamic economy is based on foundations of innovation, knowledge and human capital – all highly dynamic elements that continue to evolve with time. He pointed out that with its ability to diversify national incomes and contribute to building a post-oil economy, the Islamic economy system has attracted the attention of several prominent nations and continues to do so. He noted that DIEDC’s efforts in the last three years have resulted in giving Islamic economy a strong foothold worldwide.

Al Mansouri said: “Rather than defining Islamic economy or advocating its importance, DIEDC’s latest goal is to demonstrate the positive impact of (the) Islamic economy on overall socioeconomic development. To fulfil this objective, we need to establish the structural framework of the ecosystem. Finance, production and consumption must feature in it as integrated systems aligned with the UN Sustainable Development Goals - especially in terms of managing resources and preserving the environment.”

He added: “One of our main objectives is to increase the contribution of Islamic economy to the country’s GDP. Achieving this aim requires putting a plan in place to refine the structure and concept of Islamic economy and enhance its competitiveness. Among the most prominent emerging trends that support our efforts are national income diversification, production and trade expansion, and a growing confidence in Dubai’s position as a global centre for Islamic industry, culture and halal products.”

HE Sultan bin Saeed Al Mansouri highlighted the keenness of emerging economies in Asia, Europe, Africa and Latin America to establish partnerships with Dubai and the wider UAE in diverse Islamic economy sectors, and linked this trend to the efforts of these countries to increase the contribution of Islamic economy to their own national GDPs.

In addition, he noted that DIEDC seeks to spearhead growth, innovation and standardisation across Islamic economy sectors. Pointing out the need for universally accepted standards governing each sector, he stressed that the UAE will focus on refining these standards in the coming years to lead their adoption on a global level.

Speaking on the strategic objectives for the period from 2017 to 2021, HE Issa Kazim, Secretary General of DIEDC, said: “Our primary objective, in collaboration with our partners, is to make Islamic economy a major contributor to the growth, diversification and sustainability of the national economy. To this end, we will work on defining key performance indicators (KPIs) to measure the share of Islamic economy and the trading volume of Islamic products within the UAE’s GDP.”

Another goal is to reinforce Dubai’s status as a top-of-mind hub for Islamic economy sectors and a central destination for investors in the field. A third objective focuses on developing an innovative ecosystem to enhance the value-add of the Islamic economy and its role in stimulating knowledge and research and development, and in encouraging projects that promote its ethics and principles.

“Through Islamic finance, we are looking to expand the footprint of Dubai and the UAE in Islamic capital markets. With our 2017-2021 strategy, we also seek to elevate the country’s position as a global platform for educational programmes in Islamic finance and charity projects.”  he added.

The foundations for defining the goals of the refreshed strategy and establishing mechanisms to implement some of the plans launched over the past three years were laid in December 2016, when DIEDC organised two workshops for its strategic partners to assess the accomplishments of the Dubai: Capital of Islamic Economy initiative. Participants discussed the challenges of boosting the growth of Islamic economy, advancing its legislative and regulatory framework, and creating opportunities for sustainable investments. They also generated ideas for new programmes pertaining to select key sectors.

Abdulla Mohammed Al Awar, CEO of DIEDC, said: “We aim to transform Dubai and the UAE into a leading hub for halal trade and logistics services through increasing the trade volume of halal products. Our objective is to create an environment that stimulates the halal sector with globally-accepted standards and proactive government support.”

He added: “Islamic lifestyle is a wide-ranging sector that includes Islamic culture with all its ethical, artistic and social dimensions. In this field, we seek to attract global talent that can help develop Dubai’s cultural identity and turn the city into an appealing destination for creative professionals across the globe who are looking to explore Islamic culture, art and heritage. We also plan to increase the contribution of Islamic entertainment activities to the country’s GDP and establish world-class facilities to showcase Islamic art and design.”

Liquidity Management through Sukuk discusses challenges and emerging solutions

Thomson Reuters, the provider of information for businesses and professionals, has released the Liquidity Management through Sukuk teaser report in partnership with the Dubai Islamic Economy Development Centre (DIEDC) and in collaboration with National Bonds Corporation (NBC) at the Global Islamic Economy Summit (GIES 2016).

The report discusses the key challenges facing liquidity management in Islamic finance and highlights some of the current existing solutions to overcome these issues. The full version of the report will be released later this year.

According to the report, few instruments have been able to meet both the industry’s needs and its stakeholders’ full expectations. As a result, Islamic banks in the GCC today hold 9% of their assets in cash and equivalents and 10% in placements with other financial institutions. Islamic banks currently place liquid funds in short-term instruments such as commodity murabahah that shari'ah rules have deemed non-tradable in secondary markets. Many shari'ah experts had hoped they would be temporary solutions used in limited contexts where no other instruments could be developed, but lacking alternatives, they have instead become widely adopted in the industry.

New strategies to meet the liquidity management and personal financing needs of Islamic banks and Islamic windows at conventional banks are being developed. One such product is the National Bonds Sukuk Trading Platform, which uses assets in the local economy to structure shari'ah-compliant consumer financing.

Abdulla Mohammed Al Awar, CEO, Dubai Islamic Economy Development Centre, said: “Since the launch of our leadership’s Dubai: Capital of Islamic Economy vision, we have been working with our stakeholders and strategic partners towards developing Islamic finance instruments and reinforcing the significant role of existing instruments such as sukuk in the growth of Islamic finance. As part of our efforts, we have also been supporting studies and researches that catalyse the development of the Islamic economy ecosystem.

“This report, which articulates such efforts, offers a detailed study on liquidity management through sukuk and highlights opportunities to incentivise the growth of Islamic finance and eventually facilitate the development of related sectors. We are confident this report will be treated as an authentic reference point for all stakeholders engaged in the growth of Dubai as the capital of Islamic economy.”

Mohammed Qasim Al Ali, CEO, National Bonds Corporation said: “In line with our strategy to nurture financial literacy in the UAE and offer efficient low-risk financial products, we are pleased to contribute to this report that provides the answer to a crucial question related to the efficiency of liquidity and stability of the financial sector as a whole. Moreover the report highlights the benefits of the significant role of the sukuk platform in ensuring that liquidity and financing fulfil their main role through incentivising economic growth and resolving financial challenges faced by SMEs and business leaders - while avoiding the risks that go hand in hand with conventional loans.”

Nadim Najjar, Managing Director, Middle East and North Africa, Thomson Reuters said, “The Liquidity Management through Sukuk teaser is a highly engaging and dynamic study that inspires and excites Islamic finance stakeholders and professionals to assess the current liquidity management landscape and challenges. The report also provides a comprehensive study on recent trends and developments in Islamic finance and sukuk in the GCC region and beyond.”


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Takaful market could surpass US$50 billion by 2020

The aafaq Center for Research in Islamic Economy (ACRIE) and Hamdan Bin Mohammed Smart University's (HBMSU's) Dubai Center for Islamic Banking and Finance (DCIBF) have released a report on takaful at the third Global Islamic Economic Summit (GIES) in Dubai, UAE.

Takaful: Global Challenges to Growth Performance and Governance was developed in collaboration with the Dubai Islamic Economy Development Centre (DIEDC), and ACRIE, a subsidiary of aafaq Islamic Finance. 

 
The report reveals that the GCC region currently dominates the takaful business, with Southeast Asia and Africa as the next biggest markets. The report estimates that the global takaful market could be worth US$52.5 billion by 2020. Potential obstacles include the relative under-development of insurance distribution channels in several emerging markets, however.

HE Essa Kazim, Governor of the Dubai International Financial Centre (DIFC) and Secretary General of the DIEDC said: “The takaful sector is an important component of global Islamic finance that requires more attention and research in order to address major issues and achieve long-term growth. We commend DCIBF for its thorough and precise study on prevailing trends, opportunities and threats in the takaful domain.”

Dr Mansoor Al Awar, Chancellor, HBMSU, said: “Over the last 10 years the number of takaful companies has climbed nearly four-fold, reflecting the growing global popularity of the sector and its increasing importance to the development of Islamic finance. Despite its gains, though, the industry is still under-manned and faces several issues in vital areas such as innovation, distribution, and legal structures, among others. DCIBF’s report exhaustively investigates the key factors affecting the performance and governance of takaful and what actions government and industry need to take to ensure sustained and profitable growth.”

HE Dr Abduljaleel Alblouki, Deputy Chairman of aafaq Islamic Finance, added: “ACRIE and DCIBF and DIEDC have prepared an outstanding account of the current Takaful landscape and key areas for improvement that can further increase the sector’s impact on the global Islamic economy. It was a very enlightening experience for us to join the Center in exploring the takaful industry’s mechanisms, strengths, and gaps. Our report gives takaful players and stakeholders a clearer picture of what to expect, what to address and what to aim for as the sector gains a firmer foothold on the international markets.”

Recognizing takaful’s growing importance as an Islamic alternative to insurance, HBMSU and DCIBF tapped Dr Omar Fisher to prepare the report. Dr Fisher, who earned his PhD in takaful in 2005, has founded takaful companies in three countries. He said: “The Takaful Report, a groundbreaking effort by DCIBF, looks into the global trends and major challenges facing this risk management sector by covering 219 takaful operators across 39 countries. The publication of such comprehensive report further reinforces knowledge sharing in the industry and anchors Dubai as the Capital of Global Islamic Economy.”

Produced in Arabic and English to reach a broad international audience, the scientific report examines the efficiency and financial stability of the Takaful sector in countries with dual financial and economic systems. It identifies and discusses various Islamic insurance challenges and issues, quantifies investment trends, and analyses the impacts of demand and industry structure on market movements. It also explores the governance mechanisms of the takaful industry, delves into diverse takaful operational models, and provides key recommendations to policy makers and stakeholders.

The key insights provided by Takaful: Global Challenges to Growth Performance and Governance reflect the growing role DCIBF is playing in investigating and studying major technical and socioeconomic issues affecting Islamic banking and finance. The Center is the result of HBMSU’s efforts to become the first learning institute to launch a dedicated platform for enhancing both academic knowledge and human capital development in Islamic banking and finance at the regional and international levels. DCIBF embodies HBMSU’s commitment to the provision of quality education, training, research and community service and the promotion of best practices in the field of Islamic banking and finance.