95
4.3 UNITED ARAB EMIRATES (UAE)
4.3.1 OVERVIEW OF UAE’S CAPITAL MARKETS
The UAE is a constitutional federation of 7 emirates, i.e. Abu Dhabi, Dubai, Sharjah, Ajman,
Fujairah, Umm al-Quwain and Ras al Khaimah, formed on 2 December 1971. Each emirate
maintains autonomy over its oil resources, fiscal policies and debt issuance, and manages its
own budget.
Global Islamic banking and finance practices originated from the UAE when the world’s first
commercial Islamic bank―Dubai Islamic Bank (DIB)―was founded in 1975. However, the UAE
Islamic capital market only commenced in the early 2000s, with the establishment of the
Securities and Commodities Authority (SCA) in 2000 (which plays a key role in organising and
regulating the UAE capital markets) and the foundation of the Dubai International Financial
Centre (DIFC) in 2004 (a financial free zone and full-fledged onshore financial centre to
promote Dubai as an international financial hub similar to London, New York and Hong Kong).
Securities exchanges had then been established to propel the growth of the financial markets
in the UAE, notably the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market
(DFM), which operate under the SCA, and Nasdaq Dubai―the Middle East’s international
financial exchange―located in the DIFC and regulated by the Dubai Financial Services
Authority (DFSA).
The UAE Islamic debt capital market expanded significantly in 2005, after the GCC economies’
efforts to reduce their overdependence on oil and hydrocarbon revenue and seek other
investment strategies, including fixed-income instruments. The growth had been further
spurred following the setting up of the Dubai Islamic Economy Development Centre (DIEDC) in
2013, to promote Dubai as the capital of the Islamic economy, whereby Islamic finance has
been set as the first 7 key strategic pillars. In March 2017, the DIEDC launched its refreshed 5-
year Islamic economy strategy (2017-2021), which focuses on the growth of 3 core Islamic
economic sectors, including Islamic finance (refer to Box 4.5 for further details on both DIEDC
strategies). In 2014, Dubai also launched its 7-year plan, known as Dubai Plan 2021, to
reinforce and accelerate its position as a pivotal hub in the global economy.