Dubai has overtaken other financial centres in listing Islamic bonds on its exchanges, and is mounting a global drive to attract more listings while developing new channels to trade sukuk, the chief executive of Nasdaq Dubai said.
"Demand for Islamic financial products still exceeds supply - there are very few financial products for which this is true," said Hamed Ahmed Ali.
The exchange is working on ways to sell sukuk directly to retail investors, expanding the primary market beyond institutional buyers, and designing a Shariah-compliant repurchase agreement, he said.
Dubai launched an effort to list sukuk in 2013 as Dubai wants to become a top Islamic finance centre. A study published by Nasdaq Dubai this week suggested the effort was succeeding.
Sukuk listed on Dubai's two exchanges, Nasdaq Dubai and Dubai Financial Market, rose to $36.7 billion last month from $7 billion in 2013, said the study, whose results are broadly in line with Thomson Reuters data. Nasdaq Dubai accounts for the vast majority.
This put Dubai ahead of the world's three traditional sukuk centres: Malaysia, with $26.6 billion listed on Bursa Malaysia and the Labuan free trade zone, the Irish Stock Exchange with $25.7 billion, and the London Stock Exchange with $25.1 billion.
Until 2013, issuers from the Gulf usually chose European exchanges to list sukuk; that has begun changing.
Unlike Europe, Dubai has a stable of local state-linked firms which can be encouraged to issue sukuk and list them locally. Noor Bank listed $500 million on Nasdaq Dubai last week; Dubai's government owns over a quarter of the bank.
Also, Dubai is at the heart of a Muslim region, which both supplies sukuk and provides investor demand, Ali said.
While 56 per cent of Dubai's listed sukuk are from United Arab Emirates issuers, 22 per cent are from Saudi Arabia; Ali said he wanted the proportion from Gulf countries outside the UAE to grow.
In response to Nasdaq Dubai's study, the Irish exchange said it "continues to attract high levels of listings from the Gulf Cooperation Council region, both Islamic-based and conventional finance". The Malaysian and London exchanges did not reply to requests for comment.
Sukuk listings are not the only indicator of health for an Islamic finance centre. Another is sukuk trading turnover; this remains low on Dubai's exchanges, as many institutions hold instruments to maturity or trade them over-the-counter.
In some ways, Malaysia has a much more vibrant sukuk market than Dubai, with more small corporate issuers. About $69 billion of sukuk were issued in Malaysia last year, though many were not listed, regulatory data shows.
Ali said Nasdaq Dubai aimed to stimulate trade by developing direct sales to retail investors. Bahrain's bourse opened such a channel to issue local currency sovereign sukuk in January.
Nasdaq Dubai's plan to introduce an "Islamic repo" contract - a Shariah-compliant version of the short-term loans of securities which banks use to adjust their liquidity - could also encourage more active use of sukuk.
The exchange is discussing a proposed template with local and international banks and hopes to introduce it late this year or in 2016, providing it wins the endorsement of religious scholars. So far, only Malaysia, Indonesia and Bahrain have taken major steps to develop Islamic repos.
Early last year, Nasdaq Dubai introduced a platform for murabaha, another form of Islamic liquidity management in which one bank buys merchandise and another agrees to buy it at a mark-up. It aimed to grab some of this business from the London Metal Exchange.
So far the new platform has had modest success, trading a total of around $17 billion among three users. The exchange is seeking to attract new participants, Ali said.