Dubai's bid to build a global capital for Islamic industries has excited the financial industry, but bankers say succeeding where others have failed will be a challenge.
Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, announced plans last week to refashion the emirate as the "capital of Islamic economy", with plans to develop industries including Sharia finance, dispute resolution and halal food production.
Finance firms are already leaping to take advantage of the new policy drive. Shuaa Capital said yesterday it had sought Central Bank approval to open an Islamic operation via its Gulf Finance Corporation subsidiary.
No country has attempted to bind together a unified set of standards across all Islamic industries, and bankers question whether Dubai can outdo others that have tried and failed to become Sharia centres in the past.
"It's a very ambitious goal because we've seen a lot of such initiatives over the years," said Harris Irfan, the managing director of Cordoba Capital, an Islamic advisory firm. "It's great to have the ambition, but the onus is on institutions to implement correctly."
With three quarters of global Islamic assets held within a few hours' flying distance of the Arabian Gulf, there were plenty of opportunities for the emirate, said Muneef Tarmoom, the managing partner of Abu Dhabi Equity Partners, a Sharia finance boutique.
"Just like the Dubai International Financial Centre, you'll need to have the perseverance to make it happen," he said.
But rival Islamic financial centres are numerous, and although most have tried to establish their own boards for standard-setting, no globally accepted rules exist.
Bahrain and Malaysia both host Sharia standards bodies, but Bahrain's financial sector is still reeling from the unrest of 2011 and persistent protests have compelled many bankers to relocate to the UAE.
Saudi Arabia has positioned itself as the most conservative of Islamic countries, and therefore the benchmark for the rest of the industry. Even Ireland has sought to position itself as an Islamic hub for Europe, where laws are more favourable to financial firms.
But Dubai was already the "de facto" capital of Islamic finance in the Arabian Gulf, said Mr Irfan.
The factors that brought record numbers of sukuk to market were likely to persist this year, according to a report this week from Fitch Ratings.
"Confidence and investor sentiment toward Islamic bonds have contributed to growth," said the report.
But the disparate nature of existing Islamic finance centres was a major hurdle for the industry, added Fitch.
"One of the main limitations is the legal precedents in terms of effective enforcement in many jurisdictions where sukuk issuance is prevalent. "As such, it remains uncertain whether certificate holders will be able to enforce their contractual rights in local courts."
The UAE has never tested its bankruptcy laws in the event of a sukuk default.