Interview: Essa Kazim
How will the expansion of DFM’s sharia-compliant standards impact the growth of Islamic finance?
ESSA KAZIM: The Islamic finance industry is deeply rooted in Dubai. In fact, the DFM was the first sharia-compliant exchange globally. Over time, as more Islamic banks opened and attracted a growing number of clients from the Islamic world and beyond, it became clear that the lack of a sufficient regulatory framework and standardisation across the space was hindering its growth.
As part of the government’s broader initiative to develop Dubai into the capital of the global Islamic economy, we launched a number of standards designed to stimulate the development of the Islamic finance industry: one on stocks in 2007, one on sukuk (Islamic bonds) in 2015 and, most recently, one on hedging against investment and finance risks. We are also preparing to add more, including one to cover investment funds. Such standards provide an important reference for Islamic banks and financial intuitions, and they have already begun to foster growth. The total value of sukuk listed, for instance, jumped from $9bn in early 2013 to $51.2bn as of September 2017, positioning Dubai at the top of the leading sukuk-listing centres in the world.
What are your expectations regarding new initial public offerings (IPOs) over the coming year?
KAZIM: DFM strongly encourages private and family-owned businesses, as well as government-related entities, to go public. For example, DFM-listed companies have successfully raised AED40bn ($10.9bn) through the market to date, via IPOs and capital increases. Dynamic industries such as tourism, retail, health care and education would benefit from additional listings, and there are dozens of companies that have shown considerable interest in going public in the near future. Improved laws and streamlined processes, such as the Commercial Companies Law and the DFM eIPO platform, should help to create a favourable environment for IPOs, encouraging more and more business owners to go public. There is still a lot of potential for future listings as well, as almost 70% of GDP is currently unrepresented in the market.
How are emerging technologies, such as blockchain, changing the financial services industry in Dubai?
KAZIM: Dubai’s ambition to become the first government in the world to execute all transactions using blockchain by 2020 speaks to the city’s broader uptake of new technologies, and the financial services sector has been no exception. The “Smart Bourse” strategy, for instance, has seen significant investment in financial technology initiatives over the past few years, including the eIPO Platform, the iVESTOR Card for cash dividends, the Efsah system for company disclosures and the eSAR report for shareholder analysis, among others. These endeavours have simplified how entities interact with the capital markets. As for blockchain, we are currently examining the technology in an effort to better understand how it can best be applied to the exchange’s various activities and electronic services, for instance it may be utilised to strengthen the infrastructure of the electronic voting service for the annual general meetings of listed companies.
To what extent have other marketplaces in the GCC affected Dubai’s status as the financial services hub?
KAZIM: Dubai thrives within a competitive and challenging business environment. For that reason, competition with other financial centres is beneficial and welcomed. Dubai is currently seen as the financial gateway to rapidly growing markets across the Middle East, South Asia and Africa, and is working to solidify its position as such through continued updates to its regularly framework and its infrastructure. It is worth noting that the cluster of financial hubs located in the GCC is serving a region with a population of more than 1bn people, so there is abundant demand in the financial services sector and sufficient opportunities for all.
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