Dubai’s efforts to develop itself as a centre for the global Islamic economy is starting to produce results as Islamic financial instruments such as sukuk (Islamic bonds) gain popularity, especially with sovereign issuers.

“With the establishment of the Islamic Economy Development Centre in 2013, we have witnessed growth across the various sectors that represent Dubai’s strategy for an Islamic economy,” said Essa Kazim, governor, Dubai International Financial Centre (DIFC), speaking at the 10th World Islamic Economic Forum in Dubai on 28 October.

One of the key areas for Dubai to develop is the Islamic finance sector, which has performed strongly since the 2008-09 global financial crisis as global investors sought to diversify their portfolios and invest in Islamic fund that only raise funds in a sharia-compliant manner.

“Finance represents a key pillar for Dubai’s capital of the Islamic economy vision. And an area of expertise [already present] in Dubai’s financial sector,” said Kazim. “Fuelled by the booming industries of GCC and Southeast Asia, the Islamic finance industry is booming and forecast to double over next five years to reach $3.4 trillion.”

The successful develop of the Islamic finance industry in Dubai has been led by growing interest in sukuk listings following the listing of a $750m sukuk by issued by the Dubai government plus the plans by Hong Kong government to list its first $1bn sukuk on Nasdaq Dubai.

“2014 has also proved a watershed year for sovereign sukuk with several countries round the world tapping in. The importance of sukuk as a significant instrument in Islamic finance can no longer be ignored,” said Kazim. “It is expected that sovereign sukuk [issuance] will exceed 2013 levels to reach around $30bn by year end 2014, with overall outstand amount set to reach $115bn and supported by continued expansion in number of sukuk issuing governments through 2015.”

In mid-October, ratings agency Standard & Poor’s (S&P) said the prospects for the sukuk market in the Gulf region remain healthy due to rising issuance by regional governments and financial institutions. A total of $20.3bn-worth of sukuk have been issued in the GCC this year as of 5 October, according to the agency. This is a 27 per cent increase on the same period last year.

The rise comes despite corporate and infrastructure issuance falling by almost a third compared with the same period in 2013.