Will the year 2014 be a tipping point for Islamic finance? It’s a question on the minds of many inside the rapidly growing industry, as a confluence of factors came together in 2013 that could portend a structural shift in how the world views Islamic banking products and the Islamic consumer. In order for the tipping point to be achieved, the industry must move beyond its traditional hubs of Malaysia and the Gulf states and expand across emerging markets, Europe and the United States.
In October 2013, British Prime Minister David Cameron noted that the UK will issue a sukuk an Islamic bond, making the United Kingdom the first non-Muslim sovereign to do so. He said the UK intends to issue the sukuk in early 2014. Though small in size—the talk was of a 200 million British pound offering—the bond would represent a symbolic breakthrough and pave the way for more substantive offerings.
David Cameron’s government has assembled a team of Islamic finance and industry experts to fashion a strategy for London to compete with Kuala Lumpur, Bahrain and Dubai as an Islamic finance capital. Competition would be good for the industry as a whole, and London’s “stamp of approval” could also serve as a catalyst for growth in other European capitals.
Meanwhile, in the United States, a Washington-based investment bank, Taylor-DeJongh, is leading an effort to package Islamic financing in the form of a security for a major US rail car operator. Continental Rail, a carrier of freight along the east coast, would be among the first major US businesses to receive such financing. That the story was reported in the influential DealBook section of the
New York Times business pages should be considered a sign in and of itself. Entitled “Islamic Banks, Stuffed With Cash, Explore Partnerships With the West, ” the story ran on the front page of the business section: a wake-up call to all of New York’s investment-banking community.
Taylor-DeJongh has assembled a team of five bankers with experience in Islamic finance who will seek to create innovative products for US companies looking to tap Islamic funds. No doubt others will follow TaylorDeJongh’s lead.
Muslim country sovereign wealth funds and banks based in Muslim countries have long invested in the United States’ equity markets, real estate, and other products, but investors who adhere to Islamic principles of finance are relatively new to the market. The key to the success of Islamic finance in the United States will be its roll-out and messaging. Unfortunately, the term “Islamic” could still be seen as threatening to US consumers. Even those who do not find the idea of “Islamic” finance threatening would view it as exotic and niche.
Thus, a strategy that aligns Islamic finance with the ethical investing movement in the United States would serve the industry well. Second, it should also be presented as a more secure, less risky model of finance. One of America’s most famous economists, Nouriel Roubini, recently said: “There is a need for a more resilient system, and that’s where there is potential for the Islamic system. It is less volatile and potentially more stable than conventional financial systems. The advanced economies can learn from the Islamic system in this respect,” he says.
But perhaps the most consequential factor fueling the tipping point argument might be the aggressive effort by Dubai, announced in 2013, to become the Islamic economy capital of the world . Dubai has a history of spotting a trend in its high growth phase and both riding that trend and reinforcing it. A good example is the rise of Emirates Airline, founded in 1985, and now on track to become the largest carrier in the world and a global brand icon. Emirates Airline both rode the trend of rising mass air travel and also fed the trend by creating more supply.
Dubai was already an important Islamic finance center,  but the Emirate sees the story as larger than one of just banking. It has identified seven areas of growth, from halal food to Islamic consumer products to tourism and travel and cosmetics and pharmaceuticals. By growing the pie beyond finance, Dubai has demonstrated the enormous untapped potential of the Islamic economy. Indeed, a report issued by Thomson Reuters estimates the total value of Islamic business at 6.7 trillion dollars. In GDP terms, this is only surpassed by China and the United States. 
Malcolm Gladwell’s famous “tipping point” theory suggested that there is a “Law of the Few,” which posits that a few key types of people must champion an idea before it reaches its tipping point. He calls them “Connectors” and “Salesmen.” Dubai has been playing these roles for the past two decades, even for more than a century, and the emirate’s recent win to host Expo2020 cements its reputation as a global city.
Finally, Dubai’s push is not a passing fad. It is backed at the highest levels of the government. The fact that UAE Prime Minister and Ruler of Dubai Sheikh Mohammed Bin Rashid Al Maktoum appointed his trusted son and heir apparent, Sheikh Hamdan Bin Mohammed, to lead this effort and brought in one of the Arab world’s most capable government advisors, Mohammed Gergawi, to chair the Board, suggests a seriousness of purpose and longevity in implementing the plan.
From rail cars in the US to a British Prime Minister’s promised sukukto the full weight of Dubai, Inc., pushing forward a strategy of growing Islamic business, the signs of a tipping point abound.