TBY talks to Essa Kazim, Managing Director & CEO of Dubai Financial Market (DFM), on competing in the Islamic world, and ensuring standardization when it comes to sukuks.

Essa Kazim
Essa Kazim began his career as a Senior Analyst at the Research and Statistics Department of the UAE Central Bank in 1988, and then moved to the Dubai Departments of Economic Development as Director of Planning and Development in 1993. He was later appointed as Director General of DFM between 1999 and 2006. He is currently a Member of the Higher Board of Directors of the Dubai International Financial Center (DIFC) and the Board of the DIFC Authority, Member of Dubai Council for Economic Affairs, Board Director of NASDAQ Dubai, Board Director of Noor Islamic Bank, Member of the Board of the Rochester Institute of Technology, Board Director of NASDAQ OMX, and Member of the Board of Governors of Hamdan Bin Mohammed e-University.

What do you plan to do now that you have been elected Secretary-General to the new Islamic Economy Initiative Committee?

It is one of Dubai's most promising initiatives, with enormous potential. The whole idea is that the market is there and growing. If you look at the GDP of Muslim countries, it is in excess of $8 trillion. Muslims account for one-quarter of the world's population—about 1.8 billion—and their numbers are growing twice as fast as the global population. That gives you an idea of the size and potential of this sector. Our work concentrates on three major areas. One is the regulatory framework, which includes the introduction of an authority entitled to review all of the existing regulations and standards to introduce the necessary amendments toward establishing a comprehensive set of laws, regulations, and standards governing the compliance of any product with the sharia. The second area that needs some attention is the vertical and horizontal enhancement of sharia-compliant activities in the financial sector. This includes financial transactions, Islamic banking, Islamic insurance (takaful), other financial institutions, and debt instruments (sukuk). The third area is the real economy, which is meeting the requirements and demands of consumers, such as food, pharmaceuticals, cosmetics, luxury goods, and other products. Yes, it is very wide, but it also needs to be verified and stamped as halal or sharia-compliant to meet consumer requirements in this regard.

How will Dubai compete with countries like Saudi Arabia or Malaysia?

Dubai is really well positioned in terms of its infrastructure, network, location, and connectivity between East and West, which places it in a good position to compete. The Islamic economy, especially in the financial sector, is not new to Dubai. We had the first Islamic bank in the world. The Dubai Financial Market (DFM) today is labeled as an Islamic stock exchange in the sense that we have a sharia board and are sharia-compliant. We do have some activities which are not, but that is really part of the listing. At one time, Dubai was the biggest listing venue in terms of sukuk. This is an evolving situation, and the potential is there again in the sense that we have a number of Islamic banks and financial institutions with their own sharia boards, and we are in a much better position in terms of being more central in the Islamic world. Malaysia, in terms of food production, is on top, but it is at the other end of the Islamic world. We are at the heart, and Dubai is very strong in logistics and exports.

How do you ensure that your products are sharia compliant?

Today, every bank or financial institution that provides sharia-compliant services such as direct financing, murabaha, or that is managing sukuk issues has its own sharia board that takes the responsibility to ensure that its products and services are in line with the sharia. The absence of a unified set of rules and standards for judging the sharia compliance of a service creates room for disagreement and differences between different institutions' practices in this regard. In Dubai, we feel it is very important at this stage to look at having one board that would standardize not only sukuk activity, but all other activities as well. We already have an equity standard, and will soon officially launch a sukuk standard. It is very important to have one regulatory body that will standardize not only sukuk, but all other Islamic products. That is the minimum requirement for the issuance of a sukuk. When you adopt an initiative and part of that initiative is to create this kind of regulatory infrastructure, it is important to do so.

“We feel it is very important at this stage to look at having one board that would standardize not only sukuk activity, but all other activities as well."