Dubai is ideally positioned to be a leading player in the Islamic economy with its well-established and flourishing trade, tourism, transport, logistics and financial sectors. As a vibrant trade hub connecting cultures and commodities in the East and West, the emirate is well-positioned to reap the benefits of growing halal sectors.
"We are at the fulcrum of trade and investment flows between some of the fastest growing economies in the world - in South Asia, Africa and the Middle East. The UAE's initiatives to create an open economy and an environment for businesses to flourish make it a natural centre for Islamic manufacturing, services, trade and investments," says Khamis Buharoon, Acting CEO and Vice Chairman of ADIB.
The global Islamic economy has grown to a $2 trillion market traditionally driven by Islamic finance, but now fast encompassing other key pillars such as halal food, travel, tourism, entertainment, art and culture, and fashion. The robust growth witnessed by the sector stems from various factors including a fast-growing consumer base and the focused, deliberate and strong regulatory support in key markets such as Malaysia, Bahrain, the UAE and Saudi Arabia.
"The Islamic Economy has a critical role to play on the progression of sustainable initiatives through a focus on inclusiveness and financial independence," notes Dr. Adnan Chilwan, Group CEO, Dubai Islamic Bank.
Since Dubai unveiled its ambition to become the global capital for Islamic economy, significant progress has already been made, according to the Dubai Islamic Economy Development Centre (DIEDC), the government entity that is leading this drive. According to DIEDC, the Islamic economy sector contributed 8.3 per cent to Dubai's GDP in 2016, or Dh33 billion.
The latest State of the Global Islamic Economy Report from Thomson Reuters found that Islamic finance is successfully using Sharia principles to attract new clients - Muslims and non-Muslims alike - and seeking more ethical ways to bank and finance projects. The report revealed that the penetration of Islamic banking in the GCC region surged from 31 per cent in 2008 to 45 per cent in 2017, with nonresident deposits in UAE's Islamic banks growing by $1.14 billion in 2018 alone.
While conventional banking is leading the way in terms of technology adoption, Islamic finance is also increasingly leveraging digital banking and fintech. The digitalisation of financial services and payments is on the rise, most notably in the GCC region, according to Abdulla Al Awar, CEO of DIEDC.
The State of the Global Islamic Economy Report 2018/19 estimates that Muslims spent $2.1 trillion across the food, beverage and lifestyle sectors in 2017, with spending in these areas projected to reach $3 trillion by 2023. By category, food and beverage account for the largest share of spending with $1.3 trillion, followed by fashion ($270 billion), media and recreation ($209 billion), travel at ($177 billion), pharmaceuticals ($87 billion) and cosmetics ($61 billion).
The Islamic economy has proven its ability to keep pace with the latest developments in technology and investment. Companies are adopting blockchain for payments to ensure halal compliance, and track food, cosmetics and pharmaceutical products from the manufacturing facility to the retailer. Meanwhile, artificial intelligence (AI), virtual reality (VR) and the internet of things (IoT) are today attracting more investments than ever before.
The digitalisation of Islamic finance and how it will be able to compete in that sector will be a key determinant of its success, according to Prof. Laurent Marliere, CEO of ISFIN, a worldwide platform for professional firms specialising in Islamic finance, investments from and to the Muslim world and the halal industry.
"The Muslim population is rather young and living in emerging markets where banks do not have substantial networks of physical branches. This implies that customers will necessarily be keen to bank on the Internet," says Marliere. In order to ensure sustainable growth of the GCC Islamic finance sector, Marliere says banks operating in this space must develop new products to existing customer bases and expand their offerings and reach to non-Muslim customers, adding that such business opportunities can be explored in neighboring markets within Asia and Africa.
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