The Dubai Financial Services Authority (DFSA) hosted a seminar on “Liquidity Generating Innovations in Islamic Finance” in conjunction with the Islamic Financial Services Board (IFSB). The event was held at the Ritz Carlton, Dubai International Financial Centre (DIFC), yesterday.

The seminar served as a platform to explore the use of existing Islamic capital market instruments such a Sukuk and securitisation, to manage liquidity risks at Islamic financial institutions, including Takaful operators. It brought together senior delegates and subject matter experts from across the banking, financial services, regulatory and legal industries.

Mr Ian Johnston, Chief Executive of the DFSA, said: “Islamic institutions continue to be challenged by the shortage of liquidity management tools, with some relying primarily on cash and central bank placements. While exchanges and other advisers play a role in addressing some of the challenges in the UAE, and globally, we should focus on identifying opportunities in other asset classes.”

Participants recognised that with insufficient assets available on the balance sheets of Islamic banks to support the issuance of Sukuk or to securitise, other commodities such as crude oil should be considered as alternatives. Participants also acknowledged that the development of a repurchase agreement market - which has yet to gain significant traction in the GCC region - should remain a priority in the absence of alternatives.

The establishment of an Islamic financial market has been a key objective for the DFSA since its formation in 2004, and is in alignment with the Dubai Government’s 2021 Strategy and the Islamic Economy Initiative. One of the main targets set by Vice President and Prime Minister of the UAE and Ruler of Dubai His Highness Sheikh Mohammed Bin Rashid Al Maktoum in his 2013 initiative is to make Dubai the capital of the Islamic economy.

In 2016, the total value of outstanding Sukuk listings in the emirate reached USD 53 billion, most of which represented USD denominated international issuances listed in the DIFC.  The market continues to see greater diversification by issuer type, with listings coming from governments, multilateral and corporate issuers across the MENA region and East Asia.

The IFSB plays a key role in promoting and enhancing the soundness and stability of the Islamic financial services industry. The industry body has been issuing global prudential standards and guiding principles for the banking, capital markets and Takaful sectors for over a decade. The DFSA has supported the key work of the IFSB in its capacity as a full member of the IFSB and as a member of the Council of the IFSB.

The seminar kicked off the meetings of the IFSB Working Groups, which will be held on May 1 to May 3 in the DIFC.